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Accenture 2017 Global Risk Study: Banking Summary

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Since 2009, Accenture has conducted regular research to track how risk management is evolving. The 2017 Global Risk Study reveals how many of today’s banking risks—such as cybercrime—also present opportunities. Make sure your banking business adapts to drive hidden value from risk. View the summary presentation. Learn more about Banking results from the 2017 Global Risk Study: https://accntu.re/2jHhdS7

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Accenture 2017 Global Risk Study: Banking Summary

  1. 1. 2017 GLOBAL RISK MANAGEMENT STUDY Copyright © 2017 Accenture. All rights reserved. 2 IN ADDITION TO THE SURVEY WE CONDUCTED QUALITATIVE INTERVIEWS BANKING INSURANCE CAPITAL MARKETS The Accenture 2017 Global Risk Management Study is the fifth edition of our study first published in 2009. CFOs, CROs, CEOs, CCOs, CDOs who are involved in their organization’s risk decisions COMPANY SIZE 50% with global revenues or income between US $1bn & 5bn, 50% with revenues over US $5bn SURVEYED 475 each from Europe, North America, Americas and Asia-Pacific. This includes key markets such as the Canada, US, Germany, France, Italy, Spain, UK, Australia and Japan to enable analysis at country level 100 TO 200 RESPONSES FOCUSED ON THREE INDUSTRY SECTORS: Accenture 2017 Global Risk Management Study: Banking Report.
  2. 2. EVOLUTION OF RISK MANAGEMENT IN FINANCIAL SERVICES Copyright © 2017 Accenture. All rights reserved. 3 TECHNOLOGY TALENT INTEGRATION The risk function has evolved—from crisis management in 2009 to today’s more integrated, fluid and maturing discipline. We’ve witnessed technology’s growing influence, the changing profile of the risk professional and the integration of risk management across the organization. Despite progress, barriers persist. 2009 BEGINNING MATURITY CRISIS MANAGEMENT THE RISE OF DIGITAL COLLABORATION PARTNER DISCIPLINED, INTEGRATED 2011 2013 2015 2017 Technology as newest strategic priority Systems integration still a barrier Building analytical capabilities The power of automation to come Risk resource in short supply Rising headcount Lack of specialized technology skills Demand for data specialists Technology not fit for purpose Shortage in emerging technology capabilities Risk silos Towards a new risk culture Direct line to the Chief Executive Officer (CEO) Chief Risk Officer (CRO) at executive table Still closing the risk-finance gap For more details on the evolution of risk management, view our interactive timeline. Accenture 2017 Global Risk Management Study: Banking Report.
  3. 3. BANKING RISK OUR 2017 FINDINGS 4 Change is the only thing that is guaranteed for risk professionals in banking. There are new competitors and new risks to manage, particularly non-financial risks and emerging risks. The risk function is expected to drive efficiency and make considered investment choices in people, technology and partnerships. What risk challenges do banks face in 2017?* * Respondents were asked: “To what extent do the following challenges impede the overall effectiveness of your risk management function?” Data shows aggregated proportions selecting “to a great extent” and “to some extent.” REGULATORY CHALLENGE Increasing demand from multiple regulators in multiple jurisdictions TALENT CHALLENGE Shortage of skills in new and emerging technologies Shortage of core risk management talent and skills TECHNOLOGY CHALLENGE Increased velocity, variety and volume of data Legacy technologies within the risk function INTEGRATION CHALLENGE Lack of integration with other business functions, e.g. front office, operations, finance 78% OVERALL 73% 73% 72% 72% 67% 80% RETAIL 81% 73% 69% 73% 71% 76% COMMERCIAL 64% 72% 75% 70% 62% Changing Relationship with the Regulator: More open and collaborative Banks should put in place a more proactive way of engaging with regulators. But there is some way to go before banks are ready for this. Banks should put in place a more proactive way of engaging with regulators. But there is some way to go before banks are ready for this. 59% Copyright © 2017 Accenture. All rights reserved.Accenture 2017 Global Risk Management Study: Banking Report.
  4. 4. HOW BANKS ARE RESPONDING
  5. 5. THE PATH FOR RISK MANAGEMENT Copyright © 2017 Accenture. All rights reserved. 6 Banks are responding to the forces of change by taking a more fluid, progressive approach to risk management. Our research finds companies investing to strengthen their risk functions across three key areas: 1. HARNESSING SMART TECHNOLOGY 2. RISING TO MEET COORDINATION CHALLENGES 3. BUILDING NEW LAYERS OF TALENT New technologies can lower costs, but also boost accuracy and agility, bringing better insights A common data platform provides one single version of the truth Financial firms are investing significantly in risk capabilities and headcount Accenture 2017 Global Risk Management Study: Banking Report.
  6. 6. 1. HARNESSING SMART TECHNOLOGY Copyright © 2017 Accenture. All rights reserved. 7 Innovation is everywhere in banking. Banking risk leaders are looking to use technology like artificial intelligence (AI), big data and cloud to make incremental and transformational changes. But at this stage, few risk teams have fully exploited these technologies. How advanced is your institution’s use of the following technologies?* * Respondents were asked “Thinking about the range of technologies that you use to support your risk management function, how advanced is your institution’s use of the following technologies?” (Base: 159 – banking) We are highly proficient in using this technology Starting to use to some extent Not using it and do not see the potential We use the technology for risk function but we’re not extracting full potential Not using it but see the potential Cloud Big data and analytics Collaboration and workflow tools Machine learning Artificial intelligence Robotic process automation 18% 38% 26% 16% 36% 30% 16% 30% 37% 12% 26% 33% 10% 31% 35% 8% 25% 38% 11% 15% 14% 23% 17% 20% 7% 9% 6% 6% Accenture 2017 Global Risk Management Study: Banking Report.
  7. 7. 1. HARNESSING SMART TECHNOLOGY INTELLIGENT RISK MACHINES Banking respondents believe Robotic process automation (RPA), AI and machine learning are areas of huge potential. GREATEST PERCEIVED OPPORTUNITY FOR RPA IS TO IMPROVE CUSTOMER SERVICE Banking respondents in our study selected “improved customer service” as the greatest opportunity for the risk function arising from adopting RPA. LIST OF RPA AND AI APPLICATIONS IS EXPANDING RAPIDLY • Reviewing disclosures • Scanning transactions • Assessing incident reports • Picking up employee activity anomalies • Predicting risk exposures changes • Rapidly checking data quality Copyright © 2017 Accenture. All rights reserved. 8 OTHER GAINS FROM RPA Many 2017 respondents (close to a third in each case) also believe the technology can help them gain: • “Improved risk analysis and risk insight” • “Greater efficiency/productivity” • “Improved compliance” Accenture 2017 Global Risk Management Study: Banking Report.
  8. 8. 1. HARNESSING SMART TECHNOLOGY POWER OF DATA Copyright © 2017 Accenture. All rights reserved. 9 In 2017, considerable progress has been made in data analytics. 64% of respondents report risk analytics is integrated with strategic planning and decision-making and 65% say risk analytics is fully integrated into the risk function’s everyday operations. However banks are still facing challenges. Process is often manually intensive and not supported by a common source that can collect all risk types 72% of respondents say this challenge impedes effectiveness of organizations’ risk management Serious challenge: increased velocity, variety and volume of data 72% say these old systems impede the effectiveness of the risk function 67% report the same from a lack of integration across existing technology infrastructure Legacy technologies are an equally significant— and fundamentally related—challenge Many firms have much to do in the basics of data warehousing—integrating sources, cleaning and transforming data—to support the use of more sophisticated analytics techniques Accenture 2017 Global Risk Management Study: Banking Report.
  9. 9. 1. HARNESSING SMART TECHNOLOGY FAST MOVING CLOUD Copyright © 2017 Accenture. All rights reserved. 10 The use of cloud technology is becoming widespread. However, few have fully migrated their core systems to the cloud. But cloud remains crucial for cost control and is one of the top choices for addressing cost pressures. What technologies enable your risk function to address cost pressures?* * Respondents were asked “To what extent are the following technologies enabling your risk function to address the cost pressures that you are facing?” (Base: 159 – banking) To a great extent Hardly at allTo some extent Not at all Big data and analytics Cloud Collaboration and workflow tools (e.g. IBM®OpenPages®) Artificial intelligence Machine learning Robotic process automation 35% 47% 14% 33% 38% 23% 21% 50% 23% 18% 51% 25% 17% 52% 23% 13% 44% 26% 6% 6% 8% 17% 6% 82% are using cloud in some form, but… 26% are only just introducing it Just 18% report being highly proficient in using cloud 38% not using it to full potential Accenture 2017 Global Risk Management Study: Banking Report.
  10. 10. 2. RISING TO MEET COORDINATION CHALLENGES Copyright © 2017 Accenture. All rights reserved. 11 Operating across multiple jurisdictions, regional differences of risk teams spread across locations and specialized risk types can create additional silo problems for risk functions. 55% of banking respondents say that local markets struggle to balance the management of risk at the local level with organization-wide risk priorities 52% say there is duplication of effort in risk management across lines of business 50% say there is limited coordination between risk management activities at the local level and the group level 45% say that organization- wide risk processes do not capture the nuances of local markets Accenture 2017 Global Risk Management Study: Banking Report.
  11. 11. 2. RISING TO MEET COORDINATION CHALLENGES Copyright © 2017 Accenture. All rights reserved. 12 How well are risk functions integrated with other parts of the business? Overall, where it is possible, there is a trend towards greater centralization of risk management at group level. 25% of respondents have centralized coordination of risk management activities 39% of respondents expect to be further centralized 23% of respondents have centralized coordination 48% of respondents expect to be further centralized COORDINATION ACROSS RISK TYPE (e.g. market risk, credit risk, liquidity risk) COORDINATION ACROSS SPECIFIC LINES OF BUSINESS (e.g. life insurance and property and casualty insurance) In 2017… In two years’ time… Accenture 2017 Global Risk Management Study: Banking Report.
  12. 12. Percentage of respondents that said finance and risk leaders have a close working relationship that includes joint input into corporate strategy and enterprise risk management steering 7% 2015 2017 In 2 years’ time 16% 30% 2. RISING TO MEET COORDINATION CHALLENGES Copyright © 2017 Accenture. All rights reserved. 13 Another key coordination challenge is around the integration of risk with other business functions. This is something that has not improved over the years of this study. One of the key areas where integration is needed is between finance and risk. Percentage of respondents that said a lack of integration with other business functions was a challenge that impeded the effectiveness of the risk function 2013 2017 59% 67% Accenture 2017 Global Risk Management Study: Banking Report.
  13. 13. 3. BUILDING NEW LAYERS OF TALENT Copyright © 2017 Accenture. All rights reserved. 14 Beyond quantitative skills, the risk management function is expected to bring value to the company by providing economic insights, generating new ideas and building strong relationships. Smart technologies and new processes call for new skills and risk managers are prioritizing the capabilities they plan to strengthen. A great deal has been achieved in understanding emerging technology risks including cyber 78% of banking respondents say their risk management workforce capabilities are effective or very effective at understanding emerging technology risks 48%Data management Understanding of emerging technology risks, e.g. cyber Understanding of key trends in our sector (e.g. shift to digital business models) Advanced mathematical and statistical knowledge (e.g. enhancing quantitative capabilities actuaries and data scientists) Managing reputational risk associated with social media Broader commercial awareness 43% 35% 35% 30% 27% Priority risk management capabilities to strengthen* * Respondents were asked: “What are the priority risk management capabilities your institution plans to strengthen over the next year?” (Base: 159 – banking) Accenture 2017 Global Risk Management Study: Banking Report.
  14. 14. 3. BUILDING NEW LAYERS OF TALENT Copyright © 2017 Accenture. All rights reserved. 15 Percentage of respondents to Accenture Global Risk Management Study indicating that a shortage of talent is impeding the overall effectiveness of the organization’s risk management function Banks have clearly been building their cyber risk capabilities, but there is still a shortage of talent in this and other specialist areas. In fact, over the past few years the demand for relevant risk skills has intensified. 51% 2013 2015 2017 73% 73% Accenture 2017 Global Risk Management Study: Banking Report.
  15. 15. RECOMMENDATIONS
  16. 16. SIX SIMPLE BUT POWERFUL ACTIONS TO TAKE Copyright © 2017 Accenture. All rights reserved. 17 CROs should strive to meet demanding quantitative and qualitative standards and consider their internal and external stakeholders while keeping costs under control. They should do this while adapting to continual regulatory change and rapid disruption from unprecedented technological innovation, emerging risks and geopolitical instability. RPA, AI and a wide range of data-driven technologies can help speed up operations and improve measurement, modeling, analysis, integration, predictions and anomaly detection DRIVE THE BUSINESS TOWARD DIGITAL & TECHNOLOGICAL INNOVATION Banks need to keep investing in risk data aggregation and reporting systems with the flexibility to integrate multiple data sources and strong data governance features DATA MANAGEMENT JOURNEY CONTINUES START “SKILLS BLENDING” The risk management function needs people with quantitative and analytical skills, but also creativity, technology acumen and industry knowledge. This blend will support more alternative and innovative solutions EMBRACE BUSINESS AND INDUSTRY TRANSFORMATION The risk function should strive to be more commercially aware than ever in order to evolve its role to support the business PUSH FOR TOP-LEVEL INTEGRATION Risk management is already becoming more integrated with operations, IT and other parts of the business. But greater integration is often needed with the CEO and board over strategic decision-making ESTABLISH A PROACTIVE RELATIONSHIP WITH REGULATORS Banks and regulators now see themselves as part of an ecosystem that helps to protect the financial system. Each party plays a role and has to work with the other in order provide the appropriate safeguards Accenture 2017 Global Risk Management Study: Banking Report.
  17. 17. DOWNLOAD OUR BANKING REPORT NOW Today more than ever, modern banks need a risk function that goes far beyond compliance to become an integrated, strategic cog in the primary gears of the business. Or contact: Philippe Guyonnet: philippe.guyonnet@accenture.com Fred Kim: frederick.kim@accenture.com Hamdi Mohammed: hamdi.mohammed@accenture.com To learn more, visit www.accenture.com/RiskStudyBanking RISK FUNCTION’S FUTURE SUCCESS

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