Managing through persistent volatility

The ongoing proliferation and continuous evolution of risks in the banking industry – highly volatile, intricately linked and emerging from seemingly everywhere – have made today’s market and operational realities uniquely challenging for chief risk officers (CROs). At the same time, CROs are expected to command finite resources wisely and support transformation efforts designed to unleash innovation and satisfy rapidly evolving customer expectations.

The results of the 13th annual EY/Institute of International Finance (IIF) global bank risk management survey of CROs highlight the wide range of risks CROs must think about and prepare for. While many familiar risks remain at the top of CRO agendas, the threats are constantly changing and assuming new forms. Cybersecurity, which remains the top-priority risk for CROs over the next 12 months, is a perennial moving target in that attacks grow continuously more sophisticated and originate from new vectors. Similarly, concerns about financial risks have been amplified relative to prior years.

Geopolitical trade tensions may lead to increased counterparty credit risk for institutions with operations in impacted regions. Geopolitics could also test operational resilience if banks are forced to exit certain markets. Concerns about meeting regulatory rules and supervisory expectations, tied with operational resilience as the second-most urgent risk for the coming year, are embedded within multiple other risks.