Governance, risk, and compliance (GRC) programs — when managed effectively — provide organizations with enhanced decision-making capabilities that coincide with regulatory requirements and business objectives.
But for the financial sector, internal and external requirements for GRC can make developing a management framework a complex endeavor. As leaders at banks and credit unions look for ways to keep up with evolving risks and invest in their GRC capabilities, many are prioritizing building maturity in key areas like compliance and cybersecurity.
The financial sector is one of the most heavily regulated industries, and “an increasingly busy federal regulatory agenda for financial services is exerting a profound impact,” the Risk & Compliance Journal reports.
The pace of regulatory change is not likely to slow, and increasing compliance requirements translate to greater potential risk exposure.
Cyber risks are also on the rise as firms grapple with issues related to security, privacy, and cybercrime.
Financial institutions are particularly vulnerable to threats, and 300 times more likely to be targeted by cyberattacks, according to a report from Boston Consulting Group. Recent years have seen an increase in tactics like phishing and ransomware. Ransomware attacks increased by 62% in 2022, and 64% of institutions reported an increase in attack complexity, a Sophos survey of the financial services sector found.
As risks proliferate, so do the costs of cyberattacks. The cost of a data breach in the finance industry averages nearly $6 million per incident — the highest in any industry besides healthcare.
However, the consequences are more than monetary. According to a McKinsey & Company survey of North American consumers, 87% of respondents said they would not do business with a company if they had concerns about its security practices. Cybersecurity incidents can significantly impact your institution’s reputation and erode consumer trust.
To develop an effective and efficient GRC program, institutions need a holistic framework for mitigating risk, maintaining compliance, and managing data and documentation.
“Spreadsheets and emails are hardly up to the task of minimizing or preventing risk exposure for organizations,” Gartner observes. “The time is ripe for a major overhaul of the way enterprises defend against risk, and a digital-first mindset is central to the change that’s needed.”
Moving towards an integrated approach that supports shared processes and automation may require investing in technology architecture to help reduce siloed risk domains and improve cross-functional collaboration. With 83% of CEOs planning to invest in digital capabilities over the next year, many organizations are recognizing that technology initiatives provide a path to enhancing and maturing critical functions like risk and compliance.
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