How can you prepare for emerging trends and challenges in bank risk management?

2 Climate change

Another trend that is affecting the banking industry is the growing awareness and concern about climate change and its impacts on the environment, society, and economy. Climate change poses both physical and transition risks for banks, such as increased frequency and severity of natural disasters, disruption of supply chains and business activities, changes in customer behavior and demand, and shifts in regulatory and policy frameworks. To prepare for these risks and challenges, you need to assess your exposure and vulnerability to climate-related scenarios, integrate environmental, social, and governance (ESG) factors into your risk management framework, develop strategies and products that support the transition to a low-carbon economy, and disclose your climate-related risks and opportunities.

3 Fintech competition

A third trend that is reshaping the banking industry is the rise of fintech competition, which refers to the emergence and growth of new entrants and players in the financial sector that leverage technology to offer innovative and alternative solutions and services to customers. Fintech competition poses both strategic and operational risks for banks, such as loss of market share, revenue, and customer loyalty, increased pressure on margins and profitability, and need for digital transformation and innovation. To prepare for these risks and challenges, you need to understand your competitive landscape and customer preferences, adopt a customer-centric and agile approach, partner or collaborate with fintech firms, and foster a culture of innovation and learning.

4 Regulatory complexity

A fourth trend that is influencing the banking industry is the regulatory complexity, which refers to the increasing number and diversity of rules and standards that banks have to comply with at the local, regional, and global levels. Regulatory complexity poses both compliance and reputational risks for banks, such as fines, sanctions, litigation, and loss of trust and confidence. To prepare for these risks and challenges, you need to keep abreast of the evolving regulatory environment and expectations, implement robust compliance management systems and processes, enhance your transparency and accountability, and engage with regulators and stakeholders.

5 Human capital

A fifth trend that is impacting the banking industry is the human capital, which refers to the skills, knowledge, and abilities of your employees and how they contribute to your performance and competitiveness. Human capital poses both talent and culture risks for banks, such as skills gaps, turnover, diversity and inclusion, and employee engagement and well-being. To prepare for these risks and challenges, you need to invest in your human capital development and retention, align your talent strategy with your business strategy, foster a culture of risk awareness and ethics, and promote a healthy and supportive work environment.

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?