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What Keeps Banking Leaders Up at Night?

4 min read
Jun 13, 2024

Comparing yourself with others is natural, and financial institutions are no exception. Knowing whether you share the same risk management concerns as peer institutions shows where you stand. Fortunately, there’s an abundance of risk management surveys telling us what other FIs are doing.

So what do recent risk management surveys reveal? Let’s find out.

Regulatory and compliance risk is a growing concern

According to Bank Director’s 2024 Risk Survey, more than 70% of banking leaders worry about regulatory risk (up from 66% the year before), and 39% say compliance is a challenge (up from 29%).     

It shouldn’t come as a shock that banking leaders expressed greater concern with regulatory and compliance risk in 2024. Sixty percent of directors and C-suite executives believe CRA modernization will make complying with the regulation more difficult, and 32% have already adjusted their fee income structure in response to intensifying pressure from the Consumer Financial Protection Bureau surrounding fees, Bank Director found. 

Financial institutions aren’t just sweating CRA compliance and fee income. Following the collapse of Silicon Valley Bank (SVB) and Signature Bank in spring 2023, liquidity and other market risks have been top of mind for bankers and regulators. 

More than half (54%) of banks examined post-SVB report that 2023’s exams were harder than the previous year, the Bank Director Survey discovered.

Top risk management concerns

Cyber risk again ranks as bankers’ biggest concern by a wide margin. You’d be hard-pressed to find a risk management survey that didn’t discover this. For example, the Conference of State Bank Supervisors (CSBS) Annual Survey of Community Banks, released in October 2023 that included 192 banks with under $10 billion in assets, revealed that 85 percent said cyber risk increased “significantly” or “somewhat” in the past year. 

And with good reason. 18 percent of banks surveyed by Bank Director reported that the MoveIt data breach in May 2023 compromised their consumers' data. The majority of impacted institutions (14 percent) were exposed through third- and fourth-party relationships, highlighting the importance of sound vendor risk management. 

Interest-rate risk came in a close second, with 79 percent of banks reporting an increased risk, followed by liquidity risk at 76 percent. This makes sense: net interest margins contracted for 78 percent of community banks in 2023, and 77 percent of examiners asked banks about their contingency funding plans last year, according to the CSBS survey.

What else worries a bank’s C-suite? It depends on whom you ask. 

An EY/IFF survey of chief risk officers lists cyber risk (73%), implementation of regulatory rules and supervisory guidance (36%), and operational resilience (36%) as the top three risk areas requiring the most attention.

The EY/IFF survey authors noted the same resurgence in market risk captured in the CSBS data.

Risk officers eye fraud

Fraud losses topped $10 billion in 2023, a 14% increase from 2022, according to the Federal Trade Commission. Debit card fraud leads the pack, making up 35% of fraud costs, according to the 2023 Federal Reserve Financial Services Financial Institution Risk Officer Survey. Check fraud comprised an additional 31% of fraud-related expenses. Taken together, debit and check fraud account for two-thirds of all bank fraud costs.

Half of risk officers view artificial intelligence as a possible solution to bank fraud, according to EY/IFF, although these same officers also see AI and machine learning as an emerging risk. Whether AI proves to be the saving grace in tackling fraud or a threat to banking remains to be seen. What isn’t in doubt is that fraud risk will be a challenge for the foreseeable future.

The talent gap in risk management

Over two-thirds (71%) of financial institutions plan to hire more risk management professionals over the next five years, but EY/IFF reports that expectations of headcount growth are surprisingly modest given the elevated risk environment. The majority of financial institutions (52%) expect to increase risk-related staffing between 1% and 15% by 2029. 

The fact that this increase is not larger attests to the budgetary pressures financial institutions face, especially at community banks and credit unions. Community banks cite attracting and retaining talent, including risk management professionals, as one of their top strategic challenges over the next 18 months (40%), second only to deposit pricing (64%), according to the CSBS survey.

FIs plan to invest more in data management to tackle risk

Regulatory requirements and supervisory expectations are the top factor influencing whether CROs invest more in data management (52%), according to EY/IFF. Other cited benefits of enhancing data management include offering consumers better insights (45%), increasing consumer satisfaction (35%), and meeting growth objectives (36%). 

While the pace of new technologies and the rise of digital banking competitors are pushing traditional banks to reconsider their approach to engaging consumers, survey findings show that data management is more about risk than retaining consumers. Rapid reporting and enhancing risk management capabilities is the goal of improved data management for 44% of risk officers, compared to the 35% who say the goal is to understand customers, according to EY/IFF.

Risk management solutions to meet today’s challenges

Risk management has never been more demanding – and bankers know it. As new threats emerge and regulatory pressures mount, staying ahead of the curve requires vigilance, adaptability, and strategic investment in technology and talent.  

The insights gleaned from these surveys highlight common concerns, from regulatory compliance and cyber risks to fraud and talent gaps, allowing institutions to benchmark their efforts and identify areas for improvement. Embracing a proactive approach to risk management not only safeguards the institution but also builds resilience against future uncertainties. 

To thrive in this environment, financial institutions must leverage robust risk management frameworks and stay informed about industry trends and best practices. Continuous learning and adaptation can help institutions like yours turn challenges into opportunities and ensure long-term stability and success.

Want to learn more about how to elevate your risk management? Check out our webinar: “The Future of Risk Management: Navigating Uncertainty with Confidence.” 



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