In my previous post about the results from the 2015 Global Risk Management Study I talked about making risk a part of the capital markets growth engine. Today I wanted to share a finding that I find particularly interesting for capital markets: The need for risk teams to use analytics and modeling so they can leverage data to make decisions, be strategic and act proactively.
Today only eight percent of risk executives say their decision making is aided by risk-based analytics tools. Clearly, there is room to grow.
Digital technologies generate reams of data, both internally and externally. We’re talking about big data here. Leveraging this vast, unstructured data is still a new discipline. It’s about tapping into traditionally gathered data sources, but also monitoring non-traditional sources like e-mails and other transactions, and keeping tabs on social media chatter.
This is where, for the risk function, the nature of the game changes. Yes, risk leaders still must manage traditional risk, ensure compliance and monitor progress on regulations. But now the function is taking on a whole additional role.
The new challenges facing risk managers, including exposure from social media channels, internal personnel miscues, gaps exposed via online transactions and more, are encompassed within operational risk.
Capital markets risk leaders have only started to tap into the many facets of operational risk. Yet our report shows 58 percent of them anticipating an increase in cyber risk, one key element of operational risk. Fifty-six percent expect disruption from new digital technologies. The same percentage foresees a rise in operational risk overall.
Resource constraints are an immediate concern: The Risk Management Study found only nine percent of capital markets leaders saying they have sufficient resources necessary in specialist areas such as modeling and emerging risk. There’s a glimmer of hope, in that 27 percent expect to have the necessary resources within another two years.
Why is mastering this so critical for capital markets risk leaders? Stay tuned for next week’s post. In the meantime, read more about how the capital markets risk function is evolving in this year’s report.