Financial institutions are increasingly utilising smart technologies in their risk management functions but many are struggling to develop skills at a pace that matches technology advancements, according to Accenture study.

Smart technologies like cloud, biometrics and big data analytics are becoming more common in financial institution risk management functions. However, two-thirds (66 per cent) of executives said skills deficiencies are impeding the effectiveness of the function as these technologies evolve.

The study, which is based on a survey of 475 senior risk management executives in the banking, insurance and capital markets sectors globally, also found that three-quarters of executives (73 per cent) cite an increase in the “velocity, variety and volume” of data as impeding the effectiveness of their risk management functions.

According to the study, firms are struggling to develop the skills necessary to make use of the larger information flows and take advantage of related opportunities.

“As the nature of risk becomes more and more diverse and the amount and quality of data explodes, the need for the skills to bridge core risk management and new technologies is more urgent than ever,” said Steven R. Culp, senior managing director of Accenture’s Finance & Risk practice for Financial Services.

“Since the 2008 financial crisis, the world has changed dramatically. Previously, financial institutions responded to regulatory and control issues by adding talent. Now they must pivot to increase the skills of their talent to keep pace with new realities of data and technology. While technology cannot replace experience and good risk management discipline, the risk teams that will be most effective at integrating technologies like big data to recognise patterns and test hypotheses will be the ones that are best positioned to outperform their peers,” continued Culp.

According to the survey, 69 per cent of executives believe that a shortage of skills in new and emerging technologies is hurting the risk function’s effectiveness. Only 10 per cent said their risk teams have the internal resources needed to carry out the functions they are asked to perform.

Skills shortages in risk management have been a persistent issue for financial institutions since the 2008 financial crisis. One-third (32 per cent) of risk executives cited resources and talent as a significant challenge in 2009 when Accenture first began conducting the Risk Management Study. Two years later, a majority (53 per cent) of executives were still reporting plans to increase headcount. In 2015, only 41 per cent of executives felt their organisations had the digital technology skills needed for risk management.

Staying in Front of the Next Wave of Risks

According to the 2017 study, risk functions are still in early stages of adopting smart technologies. A minority of respondents said they are “highly proficient” at incorporating these technologies into the risk management function.

Looking outside the existing workforce to extend or enhance the team is an increasingly common strategy for dealing with talent shortages. About half of this year’s study respondents said they expect to increase their use of outsourcing in areas such as technology implementation, risk reporting and risk measure calculation.

The report looked at risk management across three dimensions: (1) integration — improving integration between the risk function and the rest of the business; (2) technology — harnessing smart technologies such as robotic process automation (RPA), artificial intelligence (AI), big data and analytics, and machine learning to improve risk outcomes; and (3) talent — obtaining a broader base of risk capabilities that incorporates strong functional experience with the skills needed to exploit new tools and technologies.

The study also suggests that the integration of risk across the organisation is still somewhat limited. Less than one-quarter (24 percent) of respondents said their risk management activities are coordinated across risk types; 19 per cent said the activities are coordinated across lines of business. Only 23 percent of respondents said there is strong integration between the integration of risk and finance.

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