Rising geopolitical, economic, and other risks are making regular evaluations standard practice in North American FIs
Following the disruption caused by the pandemic and the war in Ukraine, financial institutions (FIs) are regularly reviewing risks.
But periodic assessment of risk cultures within Canadian and US FIs has not been universal in the past, times are changing according to a new report from the Risk Management Association and Ncontracts.
The poll of 57 FIs across Canada and the US found that, while about half of respondents regularly updated their risk culture five years ago, now they all do.
“We are in an age of risk, with pandemics, geopolitics, cyber warfare, and technology advancement producing a multitude of challenges for organizations,” said Nancy Foster, RMA president and CEO. “Creating and maintaining an appropriate risk culture provides employees with the solid foundation they need to take and manage risks in ways that fit their organisation’s strategy and values.
Assessment frequency
As well as the widespread adoption of regular risk culture assessments, FIs are also ensuring that they are conducted regularly.
Two thirds of respondents said that they evaluate their risk culture every year, with 10% doing so more frequently.
Incentivizing positive risk culture is most evident in the largest firms with FIS with assets above US$60 billion running a cross-team incentive program to participate in risk culture.
Conversely, none of the firms with assets below $10 billion have a specific incentive program for risk management.
Rafael DeLeon, SVP of Industry Engagement at Ncontracts, said that recent events show how fast risks can change, prompting banks and other FIs to invest heavily in risk management capabilities.
“But [they are] also evaluating whether their risk cultures are being effectively communicated by leaders, reinforced with training, and encouraged by incentives,” he said.
