Setting a higher bar for risk management
Global financial institutions increase risk management focus and resources
Heightened regulatory requirements and scrutiny of risk management and governance have led financial institutions to increase their risk management budgets and bolster their governance programmes, according to a recent global survey from Deloitte Touche Tohmatsu Limited.
Deloitte’s eighth biennial survey on risk management practices found that about two-thirds of financial institutions (65%) reported an increase in spending on risk management and compliance (up
from 55% in 2010) to address rising risk concerns. The survey gathered data from Chief Risk Officers (CROs)—or their equivalents—at 86 financial institutions, including diversified financial services companies, banks, insurers and asset managers, with combined aggregate assets of more than US$18 trillion.
The majority of institutions that participated in the survey (58%) plan to increase their risk management budgets over the next three years, with 17% anticipating annual increases of 25% or more. This is not a trivial matter, as 39% of large institutions—particularly those based in North America—report having more than 250 full-time employees in their risk management function.
The survey’s responses also illustrated divergence when it came to the spending patterns of institutions of different sizes. The largest and the most systemically important companies have had several years of regulatory scrutiny and continue to increase their focus on risk governance, risk reporting, capital adequacy and liquidity. In contrast, firms with assets of less than US$10 billion are now more
likely to be concentrating on building capabilities to address what for them are a number of new regulatory requirements, which were applied first to the largest institutions and are now cascading downwards in the industry.
Inside magazine issue 3, February 2014
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