Protecht has released the findings of its ‘UK 2024 Financial Services Risk and Resilience Outlook’ research. The comprehensive survey, conducted amongst 400 key UK financial organizations, reveals that 26% of respondents view geopolitical events, including the aftermath of Russia’s invasion of Ukraine and tensions between the US and China, as the most critical risk area for the sector.
Interestingly the top risks are all very narrowly spread in terms of the percentage of respondents highlighting them as key issues. The ‘Top current critical risk areas’ are listed as:
- Geopolitical uncertainty (26%)
- Liquidity / access to capital (24%)
- Cyber threats / data breach (24%)
- Availability of key skills (24%)
- Economic slowdown / recovery (23%)
- Commodity price risk / scarcity of materials (23%)
- Climate change / environmental impact (22%)
- Supply chain disruption / failure (22%)
- Regulatory / legislative changes (21%)
- Damage to brand / reputation (21%)
- Pandemic risk / health crisis (21%)
Risk and resilience trends: operational resilience is high on the agenda
Risk and resilience management trends highlighted in the report include an increase in investment in operational resilience. The change in regulatory expectations in recent years has driven a significant uplift in engagement. Among respondents overall, 41% report having spent a significant amount of time investment in establishing operational resilience capabilities over the past 12 months and designing and implementing an operational resilience framework is a high or moderate priority for 58% of respondents.
“When reflecting, we can assume some of this focus on operational resilience is driven by compliance deadlines,” say the report authors, “However, there is a growing recognition of the critical risks associated with important business services, too. Boards and senior management are being asked to sign off on resilience playbooks and are demanding evidence of recovery plan testing and points of proof to gain assurance the organization is not running any unnecessary risk in third party relations and over dependency on critical suppliers (e.g. Microsoft, AWS).”
Another significant trend is the heightened focus on third party risk management (TPRM). With over two-thirds (68%) of UK financial organizations planning to increase investment in TPRM solutions, the study reinforces the need for a more integrated and strategic approach to managing third party relationships, particularly in an era dominated by cloud-based services.
A key finding of the report is the strategic advantage that financial organizations can gain through aligning their technology and data strategies. In particular, the survey highlights the ongoing reliance on manual processes in risk management, with 24% of respondents using manual processing for control evaluation and monitoring, 22% for incident/loss event management, 21% for policy management and 21% for risk assessment. This reveals the potential for digitalization to enhance efficiency and compliance.
Looking further at the role of technology, financial organizations seem cautious about the use of generative AI, with 35% in the UK saying that they are already using it but have limited or no plans to further expand its implementation over the next 12 months.
