Digitizing Risk Management: 5 Priorities for 2023

According to recent research on risk transformation in financial services from Celent, factors like this year’s banking crises and increased regulatory focus on operational resilience make “make digitizing the risk back office a continuing priority and a central driver for risk technology investment through 2023 and beyond.”

Several themes emerged in the research as priorities for CROs and other risk professionals focusing on digital transformation. Let’s take a closer look at each topic:

Risk Technology Focus Areas

Data Management and Analytics

Risk management technology enables next-generation data management, real-time analytics, and insight generation.

When institutions unify their governance, risk, and compliance (GRC) data in a technology platform, teams benefit from a single system of record for GRC programs, increased data accuracy, and enhanced analytics and decision-making capacity.

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• Struggling to develop a unified approach to governance, risk, and compliance management? Data silos increase risk exposure, hamper informed decision-making, and hinder successful GRC initiatives. Aim for integration by Unsiloing Your Data for Better GRC Management →
• Data analytics fuels many organizational decisions and strategies but is often underutilized by compliance teams. Explore the benefits of Keeping Pace With Data-Driven Compliance →

Operational Resilience

Digitizing risk functions can help overcome the “slow and inflexible GRC systems, highly manual processes, and deeply siloed operations” that prevent institutions from effectively responding to incidents and disruptions.

The researchers also point out that “recent regulatory focus on operational resilience…is triggering significant GRC transformation projects focused on integrating both divisional silos as well as fragmented risk functions.”

Related Reading

• Organizations need an integrated view of risk across operational areas to build resilience to business disruptions and address uncertainty. Learn about common challenges to watch for as you Build Resilience to Risk & Disruption →
• Get insights on how to support operational resilience through integrating enterprise risk management (ERM) and business continuity. Explore common challenges, risk management strategies, and FAQs in our e-book on Becoming Resilient →

Financial Crime Compliance

Anti-money laundering (AML) compliance enforcement and financial crime is another area of regulatory focus where technology can improve productivity and enhance insights around customer and transactional risk for financial services firms.

The Treasury Department recently released a report recommending new or updated regulations that would require “reasonably designed and risk-based AML/CFT programs,” and financial institutions are taking note of these regulatory trends.

Sanctions compliance and AML enforcement are top of mind for financial industry executives, with 59% preparing for a dramatic increase in financial crime.

Related Reading

• Financial crime, fraud, and cybercrime are on the rise, particularly in the financial services industry. Explore considerations for taking a proactive stance on Fighting Fraud and Cybercrime →
• Meeting BSA/AML requirements for customer due diligence, suspicious activity reporting, and other compliance activities is challenging, particularly for institutions that don’t have an integrated framework for governance, risk, and compliance. Learn How GRC Can Improve Compliance With AML Regulations →

Emerging Risk Response

Today’s constantly evolving risk landscape requires agility in risk management processes. Developments in emerging areas like ESG, cannabis, cryptocurrency, and artificial intelligence mean that organizations need flexibility to respond to changes and risks.

“Business opportunities arising from new business models, ecosystems, and customer behaviors, such as digital financial services, require risk departments to both mitigate exposures as well as to maximize return. The two emerging risks that present striking risks and opportunities for the business are digital assets and ESG. For financial institutions making their forays into crypto or facing increasing pressure from clients and regulators around ESG, these new risk areas require a range of coordinated responses, from regulatory compliance and operational governance to portfolio risk management.”

Related Reading

• By leveraging existing GRC frameworks and tools, financial institutions can get in front of the tide of change and start building a holistic approach to ESG risks and impacts that will serve them well regardless of what regulatory requirements materialize in the future. Explore some considerations and first steps for Delivering Comprehensive ESG Initiatives →
• The cannabis industry continues to be a gray area for financial institutions seeking to enter this underbanked and potentially lucrative market. Take note of risk and compliance issues to consider when Assessing Emerging Risks in the Cannabis Industry →

Regulatory Technology (RegTech)

54% of financial services organizations rank manual processes as their biggest obstacle to maintaining an effective compliance program, indicating that many firms still have work to do in building compliance management maturity.

Institutions that adopt RegTech benefit from capabilities like regulatory change tracking, compliance testing, and enhanced data management and reporting.

Related Reading

To empower compliance and risk management teams to keep pace with regulatory change and compliance obligations, organizations need an integrated, technology-enabled framework that supports improved efficiency and accountability. Explore the benefits of implementing capabilities like integration and automation to Modernize Your Compliance Management Program →