RESEARCH REPORT

In brief

In brief

  • Accenture’s 2019 Global Risk Management Study for banking finds several top concerns: financial crime, credit risk, regulations and cyber threats.
  • By prioritizing—and defining their sphere of control—banking risk leaders can better keep pace with a rapidly changing risk environment.
  • Our financial services report offers additional insights, as do our reports for insurance and capital markets.


What are banking risk leaders’ top concerns? Accenture’s 2019 Global Risk Management Study found a mix of old and new headaches that include financial crime, credit risk, cyber threats and evolving regulations.

While some are familiar threats, all are transforming into more worrisome concerns as the banking ecosystem itself undergoes dramatic change. To prosper banks are encouraged to identify actions they can take—and prioritize assets to protect—to establish their sphere of control.

Let’s take a closer look the top concerns posing a threat to today’s banks.

Financial crime remains the top concern

Given the millions of dollars banks have invested in anti-money laundering (AML) and Know Your Customer (KYC) compliance, is it any surprise financial crime tops banking risk managers’ list of concerns?

$25B

Banks’ total annual investment in AML compliance in the United States.1

$20B

In Europe, banks invest this total annually in compliance.2

11%

When asked how confident they are in managing financial crime’s impact, only 11 percent of banking risk leaders felt highly confident.

Today’s financial crime is more complex and sophisticated, with bad actors actively seeking gaps in a bank’s increasingly extended ecosystem.

Banking risk managers may want to tap artificial intelligence (AI) and machine learning technologies to detect and prevent financial crime. They may also want to try a new approach, such as a “hub and spoke” model, for better efficiency and fewer siloes.

A risk as old as banks themselves

Credit risk is a timeless concern for banking risk managers. Today, it is banks’ second-greatest challenge: Global debt is currently at its second-highest dollar level on record.3 Only 13 percent of banking risk managers feel highly confident in their ability to manage this risk.

Automation and smart technologies offer one option for managing credit risk. AI can validate credit risk models—and even process credit decisions at point of sale.

Another option? Risk leaders can consider a wider swath of criteria for evaluating credit risk such as, for example, a company’s cyber vulnerabilities.

Ongoing compliance challenges

The regulatory environment is still a challenge and our study finds evolving regulation tied as banks’ third most pressing concern. The high cost of complying with privacy rules and increasingly proactive regulatory supervision are keeping compliance concerns top of mind.

Only one in 10 banks surveyed are highly confident in their ability to manage regulatory risk.

Banks can tackle compliance by clarifying responsibilities between the first and second lines of defense for designing and testing risk controls adopted in response to new regulation.

As regulators ask for more and more datasets, risk teams are expected to improve their ability to produce data and analytics on demand.

Banking risk managers also can investigate and deploy new tools and work processes to identify and then assess consequences related to regulatory chances.

Ever-present cyber threats

Tied with regulatory concerns are cyber threats—happening more often and with increasing sophistication. Cyber threats can’t be brushed aside, due to the potentially significant financial and reputational damage they can inflict on an organization.

9%

Cyber threats are particularly concerning, with only 9% of surveyed banking risk managers saying they are highly confident in addressing them.

43%

Only 43% of State of Cyber Resilience 4 respondents use machine learning and AI to manage cyber security.

New technologies, such as AI and machine learning, can help detect and classify malware or spot suspicious activity across the network.

Banks can also work to master the basics. That means training workers to spot malicious activity or categorizing the bank’s most important data and protecting it.

LIBOR is coming

Whether banks are ready or not, LIBOR is to retire in 2021. For many banks, the transition may not seem like a dramatic threat—but it cannot be ignored. In our view, the sheer effort required to update LIBOR provisions in contracts, or managing conduct risk, is a major undertaking that demands proactive risk management. Yet, banks are hesitant in their response.

7%

Only 7% of surveyed banking risk managers list LIBOR retirement as a top-three concern. Some have not yet started to act.

8%

Only 8% are highly confident in managing threats relating to LIBOR.

Banking risk leaders should hesitate no longer. Rather than recalibrating risk models, risk leaders can collaborate with other business functions and identify the LIBOR retirement impact across the business.

Defining your sphere of control

Perhaps one of the most essential challenges facing banking risk managers is knowing what they can control and prioritizing what to protect. It is increasingly impossible for the function to protect everything, so a focus on preparation and planning—not prediction—is essential. That is how they can manage their sphere of control.

See the full report to learn more about next steps for banking risk managers.

1 “Anti-money laundering compliance costs U.S. financial services firms $25.3 billion per year, according to LexisNexis Risk Solutions,” Cision PR Newswire, October 10, 2018.

2 “Europe is losing the fight against dirty money,” Politico, April 5, 2018.

3 “Global Debt Quickened in First Quarter, Outpacing World Economy,” Bloomberg, July 15, 2019.

4 “2018 State of Cyber Resilience for Banking & Capital Markets,” Accenture 2018.

Steve Culp

Senior Managing Director – Financial Services, Finance & Risk


Fred Kim

Managing Director – Financial Services, Finance & Risk


Rafael Gomes

Managing Director – Financial Services, Finance & Risk

MORE ON THIS TOPIC

2019 LIBOR Survey: Ready to transition?
2019 Compliance Risk Study
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With interconnected risks accelerating faster than ever, how can risk functions keep up? Our 2019 Global Risk Management Study for banking provides insights to help functions prioritize, prepare and proactively scan the horizon for the next threats.

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