Protecht, a leader in risk and resilience software, has announced the findings of its ‘UK 2024 Financial Services Risk and Resilience Outlook’ research.
The comprehensive survey, conducted amongst 400 key UK financial organisations, reveals an industry landscape increasingly impacted by geopolitical risks, significant investment in operational resilience and the major opportunities presented by technological and data strategy alignment across the sector.
The survey, conducted across UK financial organisations of between 250-5000 employees, 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.
This was followed by the risks presented by liquidity and access to capital, which was the top concern for 24%.
Tsambika Jeffries, VP, Enterprise Operational and Financial Risk, Zepz said, “The findings of the report do resonate for firms like ours; geopolitical uncertainty can impact us around the globe and operational resilience has been a key area of focus.
“As a fintech, we embrace new technology and are constantly striving to find ways to increase automation and efficiency. The benefits of AI could be considerable, as long as risks are carefully managed.”
A further key finding of the report is the strategic advantage that financial organisations 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 digitalisation to enhance efficiency and compliance, particularly in light of new regulations such as the UK’s emerging climate change rules and the global standard for sustainability reporting.
Looking further at the role of technology, financial organisations 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.
The study also points to a shift in operational resilience, with 59% of organisations assigning significant budget to integrate operational resilience into their enterprise risk management frameworks. This reflects a proactive approach to risk management, moving from a reactive stance to an anticipatory one, acknowledging that disruption is not a matter of ‘if’ but ‘when’.
Another significant trend is the heightened focus on third party risk management (TPRM). With over two-thirds (68%) of UK financial organisations 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.
“This survey paints a picture of a financial services industry at a crossroads, with technology playing a pivotal role in navigating these changes,” said Gary Lynam, Managing Director EMEA at Protecht.
“Firms are increasingly seeking to align risk management disciplines with technological advancements to build sustainable, resilient, and efficient operational frameworks. We urge organisations to embrace these technology-led changes to not only mitigate risks but also to harness new opportunities for growth and innovation.”
Sean Titley, Director of Enterprise and Operational Risk, Metro Bank, said: “An interesting and thought-provoking survey. Geopolitical risk is certainly a key emerging risk presenting many uncertainties and is on Metro Bank’s emerging risk register, as is AI, for which we are starting to explore the benefits as well as the risks. In line with the results, Metro Bank is continuing to enhance its robust approach to meeting operational resilience requirements and monitoring the risks related to our third parties, for which it is important to have a ‘joined up’ approach.”
Ben Lowing, Risk & Compliance Director at First Central Group, said, “The Protecht survey provides a timely reminder to financial service organisations operating in a highly regulated environment of the scale, complexity and interconnectedness of the macroeconomic environment and the associated critical risk factors.
“In recent years First Central Group has gone through a very significant maturation of its Enterprise Risk Management (ERM) framework.
“In line with the key findings of the survey, we know it is imperative to invest in digitalised interconnected ERM frameworks and prioritise rigorous risk testing and processes. Financial organisations must be well prepared for the indeterminate geopolitical challenges ahead and ensure their Third Party Risk Management systems can meet the evolving regulatory landscape.”