R&C: Could you provide an overview of the range of risk exposures currently facing financial institutions (FIs)? What are the predominant issues keeping risk managers and other senior decision makers awake at night?

McNeil: We evaluate the risk exposures facing financial institutions (FIs) across five main categories: market risks, people risks, organisation risks, strategic financial risks and operational risks. In terms of market risks, an area which is particularly highly regulated, there is a lot of competition, with new entrants arriving in the online space, leading to different ways of doing business. For example, it is now rare for people to physically visit a bank branch, so the whole model has changed over the past few years to become reliant on technology. However, things can go wrong. For example, a few months ago, TSB’s online banking app failed to work properly. The problem received widespread coverage in the press and the chief executive was placed in front of a parliamentary committee to account for the system’s failure. In terms of people risks, there are many highly qualified, highly skilled people working in financial services, and many are waiting to see what the full impact of Brexit will be and whether headquarters will be relocated outside of the UK. This could mean losing staff and a subsequent struggle to attract new recruits. Strategically, reputational risk is a key issue. At the moment it seems that FIs are not popular with the general public or with parliament, for that matter. This is a cause for concern, especially given the regulatory scrutiny the financial sector is under. In terms of financial risks, the key aspect is the general economic environment. Are people borrowing money? Are they defaulting on loans? Are they looking at alternative revenue streams? Is there potential liability surrounding the advice given by FIs? Another issue is fraud and collusion within the banking sector, and the knock-on effect for share prices. Finally, in terms of operational risks, the main concern is protecting the physical assets of a company – its people and its facilities – and ensuring safety across the working environment. From a risk engineering perspective, dealing with these five categories of risk is what insurance coverage, and the risk assessments which underpin them, is all about.

Jul-Sep 2018 Issue