Risk management matures through three distinct phases:
- A foundational, compliance-driven function
- An efficient function that leverages technology and enhanced processes to improve efficiency and reduce time and expense
- An optimized function that creates value by helping drive revenue and profitability
Our experience and recent survey conducted with MIT's Golub Center for Finance and Policy finds that the banking industry is still working to move past the first phase.
- Executives responded that most of their risk activities are compliance driven
- Compliance focus was reflected by resource deployment - across all groups, more than 40 percent of respondents indicated that at least half of their risk activities are compliance driven
- Regulatory experts surveyed agreed - they see a heavy emphasis on compliance in current risk management functions
To move beyond compliance, risk management functions need to understand the need for efficiency. By embracing new capabilities, such as distributed ledger technologies, and by streamlining processes, risk managers can do more with less and meet the financial expectations of shareholders.
Data analytics is foundational to the final step, helping the enterprise to anticipate and address non-financial risks, especially those introduced by digital business models. This will require dedicated C-level risk leadership and the willingness to invest in the tools and capabilities necessary to empower your risk function to drive real value.
Read the full article about moving up the risk ladder
Download the infographic
The risk management function of the future
Transforming the risk management function
Creating a resilient risk culture
Data will drive the future of risk management