What does 2019 hold for the risk industry: Part One | Insurance Business America
Wouldn’t life be simpler in the risk management industry if we all knew what the future would hold? When we look at 2019 the picture may not be perfectly clear, but there are some obvious issues that all risk managers need to be aware of – ranging from Brexit and geopolitics, to cybersecurity and fluctuations within the financial markets.
In the absence of a risk-themed crystal ball, the next best option when trying to determine what’s ahead is to speak to the expert themselves – those at the forefront of the industry whose insight can help identify the key risk areas likely to impact us all. That is exactly what the Institute of Risk Management (IRM) has done, with the leading industry body asking its senior members to pinpoint areas of concern – many of which are similar to those included in the recently published Global Risks Report 2019, from the World Economic Forum.
“The impact of current macro trends and risks, such as cybersecurity, AI and Brexit in the UK will continue to put pressure on, and potentially change, entire business sectors,” said IRM Chairman Socrates Coudounaris.
“Leaders who think critically about the future, anticipate disruption to their sectors, while building resilience and agility in their models, will be in a better position to tackle a challenging risk environment in 2019 and thrive.”
So, what are the risks those experts are talking about? Over the next few weeks, Corporate Risk and Insurance will feature many of the thoughts of leading members of the IRM – the views of which are personal and not those of their companies.
The first comes from Sarah Christman, CMIRM, speaking on behalf of the IRM Banking and Financial Services SIG. According to Christman, Brexit will continue to make the headlines.
“Uncertainty about the outcomes of the UK leaving the European Union is forcing firms to plan for a range of outcomes,” she said. “This kind of analysis is within the skillset for the industry, and the outcomes of EU-wide stress testing suggest that the participating banks can withstand severe shocks that could arise from a disorderly Brexit. However, there remain many questions to be answered, disrupting firms’ ability to plan and execute strategy.”
However, Brexit only scratches the surface of the risks Christman highlighted. In particular, she mentioned the adoption of machine learning and APIs across financial services and the idea of open banking as presenting new challenges to the financial services industry.
“Open banking is now reality,” she said. “Previously, the boundaries of the financial services industry were set by the strength of the customer relationship and possession of the data. Compelling firms to share the data extends those boundaries to many established and start-up software companies. Coupling this shift with changing demographics and income distribution, we expect markets to become ever more competitive.
“However, the revolution expected to come from open banking now appears to be more about evolution. The slower than expected pace gives traditional financial services firms more time to adapt to new competition. It also allows regulators more time to adapt their regulatory approach and balance objectives of consumer protection with promoting effective competition. We expect both to make moves to adapt, although change may come too slowly in the face of other pressures.”
Cybersecurity too, is likely to be front of mind for financial services, according to Christman, with news of “inappropriate usage, unethical decision making and other abuses of the insight from data” likely to become more prevalent.
“Overriding all these risks is the imperative to focus on culture, conduct and customer outcomes,” she concluded. “This hasn’t changed over the past few years and we expect the standards to continue to rise.”