If I could summarize the results of this year’s Global Risk Management Study for capital markets, I would say: Seize the moment. For risk leaders in capital markets, now is the time to move the function beyond control and approve. Given the increasing complexity of today’s risk environment, Chief Risk Officers (CROs) and other risk leaders can’t be content to act in a “middle management” capacity.
Our study found nine of 10 capital markets risk leaders agreeing that the risk function has an important role to play in supporting the business’s long term growth. These leaders know the risk function must change—and, ready or not, is changing—in response to the new threats and opportunities available in today’s digital, social, data-driven market place. But nearly as many leaders (78 percent) say their existing controls and compliance responsibilities are a barrier to change.
Capital markets risk leaders still need to handle their traditional activities, but they must unveil their ability to drive profitable, long-term growth for the enterprise. CROs now have a role to play when it comes to outpacing competitors and helping the business rise above today’s challenges.
How can capital markets CROs start moving the risk function forward? I believe a few key steps can help risk leaders elevate their function:
- Crafting partnerships throughout the organization, supporting the journey toward building a comprehensive risk culture. Surprisingly, only 10 percent of capital markets risk leaders say their organizations have a strong risk culture—plenty of room for improvement here.
- Recognizing—and stepping into—the new role demanded of the risk function. Businesses generally have good mastery of financial risk and so risk management has settled into a control role. It’s the new risks that are less understood but no less troubling for capital markets: cyber, conduct, social media and operational risk. Four of every five risk survey respondents say emerging risks, such as cyber attacks, are consuming more of their resources. Guiding the business through these concerns will increasingly be a priority for the risk function.
- Tightening connections between risk and finance to drive efficient use of capital, balancing between profitability and regulatory requirements. Today, only one in five (22 percent) of risk leaders say their function coordinates closely with finance to drive decision making. The same percentage uses integrated data resources for risk and finance.
Taking these steps won’t be easy. CROs will need to build deeper relationships throughout the business, but that alone won’t move the risk function to where it needs to be. Investing in talent, particularly in specialized areas such as modeling non-financial risk and assessing emerging risk, will be a critical step in building a stronger, more influential risk function. Much progress is to be made on this front. Only nine percent of risk leaders say they have the right talent in place when it comes to specialized areas such as emerging risk.
Accenture’s 2015 Global Risk Management Study explores these issues across financial services and particularly for capital markets. My next post will take a look at big data, and what capital markets risk leaders can do to make the most of it.
Meanwhile, remember: Seize the moment. The market conditions and regulatory climate make this the right time for capital market risk leaders to expand their role beyond the second line of defense.
To learn more, read the Global Risk Management Capital Markets Report