Exploring Evolving Risks and Challenges
Perspectives from the investment management industry
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Five years have passed since the height of the financial crisis, giving us an extended window to look back at how risk management has evolved in its aftermath. At the same time, we also need to understand what risk areas are emerging and how the investment management industry is responding to these new risks.
With this mission in mind, Deloitte recently conducted its eighth global risk management survey of financial services firms – one of the most comprehensive studies of its kind – receiving responses from 86 financial institutions around the world with aggregate assets of more than $18 trillion. While half of the 86 respondents identified themselves as either standalone investment managers or investment managers of larger integrated financial institutions, we explore these findings in the context of the investment management industry.
Investment managers, like many of their counterparts in the broader financial services industry, are working to identify the most efficient and effective ways to focus their time and effort on managing risks – those they have traditionally needed to address in the past and those that are growing in importance or rapidly emerging. Of the more than two dozen risks areas we asked survey participants, we found three emerging areas in which investment managers acknowledged that their risk management approach could be improved to more effectively address these growing risks:
- Model risk
- Cyber security and data privacy
- Business continuity
In addition to these emerging risks facing the investment management industry, this report also highlights a variety of challenges and inhibitors to managing risk effectively. These challenges include:
- Data and technology
- Service provider oversight
In whatever manner a firm is addressing their risk, our survey results indicate that financial services firms have elevated the discipline of risk management further and are turning to technology and advanced data solutions to increase their effectiveness. It also indicates that there is still work to be done to both head off emerging risks and address challenges that are inhibiting traditional risk management approaches.