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BANKS have reached an "inflection point" in risk management, and how they navigate emerging risks and opportunities presented by technological innovations will "dictate their ability to thrive over the next decade".
Data poses a risk and a major opportunity, and leaders in the financial services industry must be able to manage multiple challenges and changes simultaneously, on the back of the continued impacts posed by cyber threats and digital disruption, said Tom Campanile, partner in the financial services office at accounting giant Ernst & Young (EY).
His comments followed the release of the eighth annual global bank risk management survey of chief risk officers (CROs) conducted by EY and the Institute of International Finance (IIF).
The survey found that cybersecurity has surged as a concern with 77 per cent of CROs claiming it is one of the most important risks over the next year, an increase of 22 per cent from the 2015 survey.
A majority of banks, 86 per cent, cited data-related risks such as availability and integrity as top emerging risks over the next five years.
Data will help identify and address emerging risks, as well as inform strategic and everyday decisions, said Andrés Portilla, managing director of the Regulatory Affairs Department at IIF.
"But data itself is also a source of risk, either from a data protection, integrity or fraud perspective, and risk managers have a key role to play in keeping a balance between leveraging the new technologies as much as possible within their organisations and keeping the associated risks within their risk appetite," said Mr Portilla.
The CROs highlighted the increased importance of risk and compliance functions with the looming spectre of cyber threats and digital disruptions.
However, banks were leveraging new technologies such as blockchain, robotic process automation (RPA) and chatbots to drive down costs in risk management.
The use of automation, digitisation, machine learning and risk modelling using artificial intelligence (AI) would help further reduce risk mitigation costs, the survey said.
"Over time, risk functions will have to leverage technology to improve risk management, and become technology innovators, rather than spectators. Banks will have to rethink how they manage risks, what risks need to be managed and what new types of talent will be required," Mr Campanile said.