Rapid technological advancements, shifting consumer expectations, ever-present cyber threats targeting sensitive data and operational integrity, and other risks are creating significant challenges for financial institutions. Amid a climate of uncertainty and unpredictable macroeconomic conditions, traditional and emerging threats are converging, creating a tumultuous risk landscape.
At the same time, as the industry continues to evolve at a fast clip, reliance on third-party vendors and interconnected systems are introducing potential vulnerabilities that need to be identified, quantified, and managed.
These multifaceted risks can challenge the operational resilience of financial institutions like yours and may threaten companies’ competitive edge in an increasingly crowded marketplace. Success often depends on a proactive and comprehensive approach to risk management that allows you to navigate this increasingly complex environment with the goal of better protecting your firm’s long-term viability.
3 risk categories impacting the FI industry
The ever-changing risk landscape is forcing financial institutions to adapt quickly to evolving challenges. Addressing them effectively requires a thorough understanding of incoming risks and how they might impact your organization.
The myriad risks that could derail your growth trajectory typically fit into three main categories:
Changes in the risk and operating environment
A multitude of risks are contributing to heightened volatility for the FI industry. For example, cybersecurity risks have escalated as financial institutions rely on interconnected systems and third-party vendors, which expands the potential attack surface. As the use of artificial intelligence (AI) becomes more pervasive, threat actors are deploying advanced attacks, particularly related to social engineering and fraud. Further, severe weather-related events, such as storms, wildfires, and other climate-related risks, can impact loan portfolios and in some cases insurance costs and even availability, suggesting that a reevaluation of risk assessment models is needed.