IDENTIFYING AND MANAGING RISKS WITHIN FINANCIAL INSTITUTIONS
Wijnants: Could you provide an overview of some of the key risks – both traditional and emerging – facing financial institutions today?
Pauwels: Financial institutions are facing a number of key risks. First is the pressure on margins in an increasing competitive and transparent environment. Second is the search for high yield investments in a low interest climate, what could trigger the risk of misselling. Third is legal compliance issues due to the regulatory ‘tsunami’, which raises legal uncertainty in a number of ‘grey areas’ in the law. Fourth is competition law risk, including recent enforcement activity in financial markets, such as Libor, Euribor, precious metals, and sector investigations. Another risk is digitalisation driven by both client demand and cost pressure – for example, the use of the cloud to store certain data.
Wijnants: What strategies should financial institutions deploy to quantify and prioritise the risks they face? Is there often a failure to allocate specific roles and responsibilities to tackling the issue effectively?
Pauwels: Financial institutions should use a clear and intuitive risk scale that takes all relevant consequences into account – financial, non-financial and reputational. The allocation of specific roles and responsibilities should take place by using real life examples of possible risks, focused on the company as well as its peers.
Apr-Jun 2016 Issue
Zurich Global Corporate