the future of risk management in the financial services industry

Risk management has grown increasingly complex over the years,
prompting organizations to increase the size, magnitude and reach
of their risk management functions. However, an increase in risk
management activities does not always correlate to more effective
risk management. Recent events have revealed this vulnerability
and provided a much needed “wake-up call.” Many organizations
had committed significant resources and investment in risk
management but had not worked to connect their processes.
Kingdoms or silos were developed, but the levels of interaction,
shared reporting, data exchange and coordination was minimal.
While there has been a maturing of risk management, there is still
considerable opportunity for improvement. Organizations need to
constantly challenge their approach to risk management. This is
especially true now, when risk functions are being asked to do
more with the same — or limited additional — resources. More than
ever, organizations need to rethink their approach to risk
management in order to balance risk, cost and value. Our research
shows the most commonly identified areas for improvement are:
• Improving the risk assessment approach to better anticipate,
identify and understand risks
• Aligning risk management focus with business objectives to
drive greater value and focus on the risks most likely to affect
the business
• Enhancing coordination of risk and control groups to achieve
greater efficiencies and eliminate redundancies, duplication and
gaps among risk activities
Organizations that improve their risk management activities will
not only provide better protection for their businesses, but also
improve their business performance, improve their decision making
and, ultimately, increase their competitive advantage.