Digitization is not only a potential disruptive force for the banking industry, but also increases the industry's risk level. Compliance units are kept on their toes.
Cyber risks are the biggest challenge for the banking industry, according to risk managers. Two thirds of all banks worry about a potential loss of client data and 53 percent work on scenarios under which the company gets disabled through a cyber-attack. These are the main findings of a survey called «Global Bank Risk Management» conducted by EY consultancy, including among Swiss banks.
Surge in Importance
The importance attached to risks connected with cyber-crime has risen rapidly over the past couple of years – five years ago, the issue didn’t even make the top ten of all the dangers listed by the risk managers in the banking industry.
The increase in importance in part is due to the deficiencies in the industry’s level of preparedness. About half of all banks believe that they aren’t sufficiently well prepared to deal with the challenges and 77 percent see a need to hire further experts to help them fend off potential attacks. Compliance division therefore are likely to expand further in coming years.
Swiss Woes
A further concern of rising importance is climate change. 52 percent of all risk managers surveyed by EY said that aspects connected to climate change in coming years will become major risk factors for banks. In 2018, only 37 percent held this view.
In Switzerland, there is widespread concern about the effects of negative interest rates enforced by the Swiss National Bank. Low interest rates and high property prices are seen as likely challenges.
