Digital continues to dominate the operational risk landscape
- 4 March 2019
Digital and information security risks came out top in the latest, annual ORX Operational Risk Horizon study. Information security (including cyber risk) was first in the list of current operational risks. Digital disruption was the leading emerging risk list, followed by information security.
The survey, carried out with forty-eight of our member institutions, showed that digital advancements are driving financial services firms to embrace emerging technologies (for example, AI and blockchain). Newer market entrants, specifically fintechs, are growing their market share. Firms must respond to the increasing demand for digital products, and many established banks are now launching their own offerings. But with this comes increased risk. Not only from new tech itself, but also from the level of change it brings. Digital innovations in the financial industry may increase firms’ exposure to other types of risk – for example, regulatory or model – and create new vectors for cyber attacks.
“It came as no surprise to see digital was again a key risk for financial firms. The impact of digitalisation on the financial sector shows no signs of slowing down, and cyber risk is a challenge often mentioned by our members. However, we were interested to see that our banking members were slightly more concerned about digital emerging risks than our insurance members. This may be due to the number of new digital entrants in the banking industry.” Luke Carrivick, Head of Research and Information at ORX.
In contrast to our banking members, who placed IT-related risks as their top two emerging operational risks, the insurers that took part put geopolitical and macroeconomic risks at the top of their emerging list.
About the study
We worked with forty-eight of our member firms to create the Operational Risk Horizon 2019 study. Each firm submitted their top current and emerging operational risks. These risks were analysed to build a picture of the operational risk landscape for 2019 and beyond. In total, 444 current risks and 308 emerging risks were submitted to the 2019 edition of the Operational Risk Horizon survey.