EY & IIF Conduct Bank Risk Management Survey
“More than nine in ten [91%] surveyed bank chief risk officers [CROs] view climate change as the top emerging risk over the next five years,” according to the EY and Institute of International Finance [IIF] bank risk management survey.
A spokesperson said, “Banks regard climate change as their top long-term risk, according to the EY and Institute of International Finance [IIF] bank risk management survey, “Resilient banking: capturing opportunities and managing risks over the long term.”
“The survey of 88 financial institutions across 33 countries provides a window into the changes in risk management seen globally during the past decade, and the major risks anticipated over the next 10 years.
“While climate change topped the long-term risk list for the first time in the 11th iteration of the survey, resilience across all aspects of banking featured prominently.
“More than nine in ten [91%] surveyed bank chief risk officers [CROs] view climate change as the top emerging risk over the next five years. Only about half [52%] of CROs said the same in 2019. In the near-term, almost half [49%] of CROs now view climate change as a top risk requiring their urgent attention over the next 12 months. In 2019, only 17% took that view. Beyond climate change, the most important emerging risk according to CRO respondents is the length and depth of the global economic recovery [83%].”
Mike Mannisto, Partner at EY Cayman and Banking & Capital Markets Leader, EY Region of the Bahamas, Bermuda, British Virgin Islands and Cayman Islands, said, “The survey’s findings suggest that resilience has taken on a broader meaning for banks’ boards and leadership during the Covid-19 pandemic.
“The rise of climate change to the top of risk agendas reflects banks’ increasing focus on environmental and societal resilience. Accelerated digital transformation has heightened the need for technological resilience, while growing attention on employee well-being during the pandemic speaks to the importance of workforce resilience.”
The survey finds that banks in practice are still maturing in their ability to assess physical and transitional risk exposures: just over half [54%] have a preliminary understanding of their climate change risk exposure and more than a quarter [28%] have a somewhat complete understanding.
“Covid-19 kick-started technology transformation leading management to accelerate digital transformation,” said Chris Maiato, EY Bermuda Partner and Regional Consulting Leader.
“CROs expect their banks to further accelerate digital transformation, including automating processes [88%], modernizing core technology platforms [66%] and delivering enhanced insights to customers [64%]. He added, “By investing in these technologies sooner rather than later, banks will be in a better position to deliver solutions and adapt to heavier regulatory rules in the future.”
The company noted. “In the near-term, banks believe credit risk will be the No. 1 concern over the next 12 months – according to 98% of CROs – amid the global economic recovery from the Covid-19 pandemic. Cybersecurity is perceived to be the second most urgent risk [80%].
“Additional key survey findings include:
- “Almost one in three [29%] of banks now believe they can manage down costs of controls over the next three years by using data and technology to improve risk management.
- “Seven of the top 10 emerging risks according to CROs relate to technology and data, including the pace and breadth of change from digitization [68%], industry disruption due to new technologies [68%] and obsolescence/legacy systems [62%].
- “Based on lessons learned from the Covid-19 pandemic, 93% of CROs expect to see the introduction of new or additional regulatory requirements on operational resilience, and 60% of CROs expect the same on financial resilience.
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