How can gap analysis help you improve your Financial Services risk management?

1 What is gap analysis?

Gap analysis is a method of comparing your current situation with your desired or expected situation in terms of risk management. It involves identifying the gaps, or the differences, between the two states, and evaluating their impact, causes, and solutions. Gap analysis can be applied to various aspects of risk management, such as risk identification, assessment, mitigation, monitoring, reporting, and governance. You can use different frameworks, standards, or models to guide your gap analysis, such as ISO 31000, COSO ERM, or FAIR.

2 How to conduct a gap analysis?

Conducting a gap analysis for Financial Services risk management may vary depending on scope, objectives, and methodology, but typically includes defining the current state by documenting and analyzing existing risk management practices, policies, processes, and controls. It also involves defining the desired state by defining and prioritizing risk management goals, objectives, and expectations. Identifying and measuring the gaps involves comparing the current and desired states and assessing the impact, significance, and root causes of the gaps. Lastly, developing and implementing action plans to close or reduce the gaps is necessary. Action plans should be defined with specific actions, resources, responsibilities, timelines, and indicators for each gap while aligning with risk strategy and culture. Progress and outcomes of action plans should be monitored and evaluated with adjustments as needed.

4 What are the challenges of gap analysis?

Gap analysis can present some challenges for your Financial Services risk management. Defining and measuring the gaps can be difficult if you don't have a consistent definition or reliable data to support the analysis. Additionally, it can be hard to compare and benchmark your risk management with different standards or best practices, or assess the impact of the gaps. Developing and implementing action plans can be ineffective if you don't have a realistic plan, resources, and commitment to execute it. Additionally, resistance or barriers to change may arise and unforeseen risks may affect your plan. Monitoring and evaluating the results of your action plans can be incomplete if you don't have a systematic process or clear indicators to measure performance and improvement. Furthermore, feedback or learning mechanisms may be lacking to adjust or refine your plan, or identify new or emerging gaps.

5 How to use the results of gap analysis?

Gap analysis can be beneficial for improving Financial Services risk management by providing valuable inputs, outputs, and outcomes. You can use the results to communicate and report your risk management status to stakeholders, such as senior management, board, regulators, auditors, customers, or investors. It can also be used to educate and train staff on risk management goals and expectations. Additionally, you can use the results to review and improve risk management practices, policies, processes, and controls. Various formats, methods, techniques, and tools can be used to present and verify the results.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?