Financial firms struggling to assess risks of Disruptive Technologies

An overwhelming majority of financial firms’ risk managers don’t believe they can adequately assess the risks of disruptive technologies but are open to new strategies and tools to better manage emerging threats, according to a new report by Accenture.

The report, “Accenture 2019 Global Risk Management Study,” is based on a survey of nearly 700 risk management executives in the banking, insurance and capital markets sectors globally.

According to key findings of the report - Only 11 percent of risk managers describe themselves as fully capable of assessing the risks associated with adopting artificial intelligence (AI) across their organizations, and even fewer said they are fully capable of assessing the risks associated with robotic process automation (RPA) or blockchain (9 percent and 5 percent, respectively).

The report notes that the external risk environment is becoming increasingly complex, with risk teams realizing they must adapt their approaches to contend with new threats and the heightened pace of change.

“As the risk landscape continues to shift and evolve — with increasing complexity in protecting against data breaches and managing new, interconnected threats — risk managers aren’t able to evolve at the same pace as technology,” said Steve Culp, a senior managing director at Accenture who leads the company’s Finance & Risk practice. “Fortunately, risk managers acknowledge the need to adapt and embrace new tools and approaches, including broader sources of data, advanced analytics and AI, even against a backdrop of mounting cost pressures.”

While disruptive technologies — including AI and natural language processing — can present risks across organizations, the survey revealed a strong correlation between the deployment of these technologies and robust risk-readiness within the risk function itself.

For example, 73 percent of respondents whose risk functions use machine learning are satisfied with their progress during the past two years in preparing their business for volatile future scenarios, compared with only 45 percent of respondents whose functions don’t use machine learning or advanced analytics.

Unfortunately, risk functions’ scaled adoption of sophisticated technologies remains limited. While nearly all risk functions have started using RPA to automate routine tasks, only two in five respondents (40 percent) said they apply advanced analytics such as AI and predictive modeling to their datasets, with only 10 percent applying machine learning. The report notes that this lack of adoption is a missed opportunity for risk functions, given these technologies’ immense potential to mitigate risk and improve risk professionals’ performance.