ProSight Financial Association released the results of the fourth annual RMA Chief Risk Officer (CRO) Outlook Survey. The survey reveals a financial services risk management environment that has been affected by the 2023 regional bank crisis as critical risks that preceded the crisis such as cyber, fraud and third-party risk remain.
Top Risks
The top risks this year marked a resurgence of several non-financial risks. Cyber risk was the No. 1 risk cited in the survey, named by 63% of respondents as a top-tier risk. Fraud (44%) returned to the top five in the No. 2 position after an absence last year, and broader technology risk, which was No. 1 in the most recent survey, came in at No. 3 (38%). The top five was rounded out by wholesale credit risk at No. 4 (32%), down from No. 3 a year earlier, and third-party risk (32%) was a new entry in the top five.
Banks on Guard Against the Speed of Risk
Ninety-three percent of respondents noted a need for the banking industry to adapt to the increased speed of risk demonstrated by bank stock volatility, unprecedented deposit runs and other developments in 2023. CROs said their institutions are implementing new early warning indicators and risk limits, enhanced scenario analysis, crisis management and incident response plans and revised models based on data from the 2023 crisis.
As they face new challenges, respondents believe the future holds still more uncertainty as risks and opportunities emerge from the rise of generative AI and other technologies, geopolitical events, market behavior and as-yet-unknown sources.
Heightened Regulatory Demands
Adding to the pressures, 84% of respondents said that their institutions are being held to higher standards by supervisory teams, and CROs largely expect that trend to continue. Many also noted that regulators have higher expectations for faster response to questions and progress on open issues.
CROs Look to the Future
To thrive in a faster, more complex environment, risk executives are looking ahead by green-lighting projects to help their institutions optimize and gain efficiency. The most common major initiatives center on analytics and modeling, cyber/technology risks, risk data and infrastructure, AI and risk governance and reporting.
“ProSight is committed to strengthening and advancing the financial services industry and providing risk executives and managers with tools and insights to help inform their strategies,” Debbie Bianucci, CEO at ProSight Financial Association, said. “ProSight is uniquely positioned to bring insights, expertise, and tools to CROs and their risk management teams.”
“This year’s survey and its aggregation of the most prevalent risk priorities and practices will help risk officers manage these challenges head-on, especially in areas of growing concern like cyber and fraud,” Edward J. DeMarco Jr., managing director of advanced risk services at ProSight Financial Association, said.
“This year’s survey highlights that many of the impacts from the 2023 regional banking crisis are here to stay,” Michael Duane, partner and co-head of the Americas finance and risk practice at Oliver Wyman, said. “Risks are materializing faster as the world becomes more interconnected, with cyber, technology and third-party risks continuing to rise in importance.”
