Ian Davies, head of risk Europe, Schroders
Regulatory change is top of the agenda for management and being able to respond to this correctly is critical for financial services. Hopefully firms are operating the way regulators envisaged it. For example, the protection of client assets, designing and selling appropriate products to investors and ensuring that products are managed within their risk profiles are sound business practices that firms with integrity should be doing. However, the requirement to document compliance with regulations in areas such as the Alternative Investment Fund Managers Directive is more onerous. This directive meant firms had to make expensive system changes to be compliant.
Cyber risk is one of the greatest current issues, although other risks are also recognised. As [StrategicRISK’s] survey shows, cyber risk is particularly concerning owing to the evolving nature of the threat. The traditional view of hacking (the lone geek in a bedroom), has evolved. Now, more resources are being brought to bear from criminal organisations and nation states. Motivations for cyber attacks have also changed from those who cracked systems to prove that they could do it, to politically driven motives.
Challenges likely to emerge in the next 10 to 15 years relate to the asset management sector, which is under a lot of pressure on margins, from multiple sources: regulatory costs, political pressures and low-cost tracker products. Financial services will further consolidate to achieve economy of scale, bear the cost of regulations and systems and build resilient balance sheets.
This article was first published in StrategicRISK’s Financial Institutions Report, published in association with Zurich. To download a copy of the full report, click here