Issue 21: Swissed Opportunity

Welcome to the revamped This Week in GRC, MBK Search 's digest of the week in governance, risk and compliance.

Not only does this issue have a new look and feel, its format is different too. Each area of GRC has an individual section featuring three news stories and a larger feature. The aim is to give equal attention to the full gamut of stories in this vast and lively sector.

Lastly, the newsletter will be taking a break next week, returning on Friday August 18.

The Opening Bell: A Swiss Miss?

When Credit Suisse collapsed earlier this year, many thought a reckoning would visit Switzerland's banking industry. Surely, the end of one of the country's enduring financial pillars would spur a change in approach, or at the very least, a period of soul-searching?

Not so much, as Bloomberg reports.

Even though the collapse and rescue of Credit Suisse was a major blow to Switzerland's reputation as a stable financial center, precious little has been done to reorganize and reform.

"Yet four months on, there are few signs that anyone is readying for major change in Switzerland. It is almost as if most Swiss heaved a collective shrug and the country went back to making money. Unemployment has barely budged and is not expected to move much even after bank layoffs, the country’s annual inflation rate of 1.6% remains the envy of the industrialized world and the almighty Swiss franc has even gained in value since March when the deal was brokered."

Significant changes seem unlikely due to Swiss political and cultural inertia, but you know what they say about history and repetition...

How the UK and Europe might shape global AI regulation

As different countries mull different approaches to regulating AI, questions arise about whether there can be a global consensus on the technology.

In The GRC Story , we explore how moves in the UK and EU to tackle AI might shape the world's response. Read the full story here.

News:

• U.S. banking watchdogs told a House panel that efforts to weigh climate risks don’t mean banks need to cut off legal businesses.
• Risk management expert Adriano Lanzilotto explains what supply chains and SatNavs have in common, and why data is the most important tool in a risk manager’s arsenal.
• Global banking giant UBS has been fined more than a quarter billion dollars for misconduct at Credit Suisse.

"There is a lot of work to do in AI risk management," writes Alex Crawfield. "The public (and politicians) do not understand it completely, and that breeds a lack of trust."

One of the biggest quandaries facing risk managers is how best to deploy AI tech, while simultaneously assessing its fast-evolving risks.

While Crawfield offers cautious optimism — the NIST framework and third-party oversight are steps toward responsible AI development — he warns against complacency. A worthy read for any one in the risk space .

News:

• Wells Fargo and SocGen will settle with the SEC and CFTC over use of messaging apps, while Truist Financial also disclosed this week that some of its subsidiaries have received requests for information from regulators.
• The SEC's Division of Examinations released a risk alert on Monday flagging staffing and policy weaknesses in ALM compliance exams.
• The United Kingdom's Chancellor Jeremy Hunt has asked the country's financial regulator to investigate whether banks are barring politicians from accounts.

New research by Scientific Beta has found that companies with high ESG ratings pollute just as much as companies with low ESG ratings .

This report from the FT finds there is little correlation between ESG ratings and carbon emissions intensity.

"The carbon intensity reduction of green [ie low carbon intensity] portfolios can be effectively cancelled out by adding ESG objectives," says Felix Goltz, research director at Scientific Beta.

The report raises an interesting question for investors. How wary should they be of these trade offs, and how should they decide what sustainability aspects they want to priortize?

News:

• A key suspect in the Wirecard fraud case told a Singapore court that the firm’s auditor EY was too gullible as it accepted fabricated letters confirming millions of euros in cash without any further checks.
• A U.S. Federal judge ruled against two former executives of Cognizant Technologies , who had been arguing that Cognizant had acted as a de facto arm of the government when the company investigated the two about their role in a corruption scheme.?
• The Big Four are fighting to block proposed rules that would force them to take more responsibility for rooting out fraud at the companies they audit.

The are more than 200 ESG standards in use worldwide. For internal audit, it raises both opportunities and challenges. IA teams can use the metrics to offer assurances to firms, but the breadth of ESG makes it difficult to cover everything.

This report by Wolters Kluwer explores some of those issues and gives IA teams scope for delivering valuable insight on ESG standards.

News:

• Multiple hospitals across the U.S. have reported health data breaches as a result of a ransomware attack targeting the MOVEit Transfer file transfer app.
• New survey finds 68% of health companies think third party risk management in U.S. healthcare is ineffective in preventing data breaches.
• Consumers are at increasing risk of misinterpreting unregulated polygenic tests, a report has found .

Republican Presidential candidate and former biotech executive Vivek Ramaswamy has made headlines when he criticized the FDA as corrupt and overreaching.

In response, biotech reporters Adam Feuerstein and Matthew Herper explore Ramaswamy's claims , calling them hyperbolic at best and false at worse.

"Ramaswamy wants his followers to believe that the FDA is blocking access to medicines. This is false," says Feuerstein.

Bank credit lending is tightening, adding to the contractionary forces from the Federal Reserve's actions. The combination of slowing money supply, declining bank credit, and high real policy rates creates a perfect storm. "Time to buckle up," warns economist Lacey Hunt.

Assessing third-party software is top of book for many in GRC. In this episode of Fintech Chatter, CEO of Anility Patrick Connolly talks about how they are changing the way firms evaluate the financial health and corporate structure of third-party services providers.