Last month, Risk.net, a UK-based website that covers operations risk at financial services firms, released its list of top 10 operational risks for 2017. It's no surprise that financial services companies face many of the same risks that businesses in all industries face.
So what are those top three risks and how can organizations combat them?
1. Data Breach and Cyber Security
The vast interconnectivity of devices today spurred a new term “The Internet of Things” (“IoT”) that broadly describes the network and related devices that can be susceptible to cyber risk. The risk of data fraud and data theft, including “social engineering” has become more pervasive and disruptive. The threats will be fueled by new and growing exposures: hackers are turning to the weaponization of Artificial Intelligence (“AI”) and robotics. As IoT expands the web of interconnected devices and networks, it creates more opportunities for hacking. Similarly, as biotechnology grows more dependent upon interconnectivity, it grows more vulnerable to disruption.
2. Volatility of the Global Market
As the economy becomes more global, there are more sources of business interruption, especially supply chain disruption. Major sources of that disruption are cross-border armed conflicts and the failure of national governance. Risk.net observes the dimension of political tides such as those underlying the Brexit vote as giving rise to legislation-based disruption.
Changes in legislature and regulation will be marked by economic sanctions and protectionism. Risk.net observes that “tighter anti money laundering (AML) controls and efforts to prevent transactions with internationally sanctioned entities have been a priority of regulators around the world …” International controls on the flow of funds will reach well beyond the financial sector. Various controls and reporting requirements affect all companies operating across borders regardless of the industry. The growing body of regulations from increasing numbers of countries presents a compliance risk to these companies.
Mitigating the Risks
So how do we meet the challenge of managing these risks?
- Integrate IT risk with business risk. Factor in the overarching cyber risks associated with big data, such as mobile apps, IoT (Internet of Things), and cyber crime.
- Make a list of the “Top 10” and “Next 10” risks by likelihood and impact – then write down how you are managing those risks to reduce them, making the risk tolerable in your business.
- Create and foster a culture of risk awareness across the organization.
The ALS Group has a handy to-do list for budgeting and planning for risks. The items on the list are manageable tasks that will methodically get your arms around all of your organization’s risks.
As the world changes and globalization elevates your risk exposure — even if you’re a domestic-only business — avoid surprises from events that could impact your strategic goals.
Read the entire list of our risk planning New Year's Resolutions for 2017.