As business environments evolve and new risks emerge, companies must rapidly assess and mitigate risks. PwC’s 2022 Global Risk Survey contains valuable insights for the financial services industry that highlight the changing patterns of business and the evolving nature of threats. The banking and asset and wealth management industries are two sectors within this industry undergoing rapid rates of transformation, the process of which holds valuable insight into the manner of transformation.    

2023 and the Promise of Growth 

From a global perspective, the coming financial year represents a promise of strong growth for the financial services industry.

Of all wealth and asset management respondents to PwC’s survey, 64% expected their business to grow, with 20% expecting growth of over 10% per anum. The top factors driving this growth are: new products are services (15%), new customer segments (13%), and strategic partnerships (11%). This comes on the back of record numbers for the wealth and asset management industry: wealth managers saw a record of USD 1.2 trillion in flows into investment accounts in 2021. 

The banking sector, meanwhile, also expects growth, with 76% of banks expecting to increase revenue. Driving this growth is the digitalization of products and services (17%), the launch of a new product or service (17%), and expansion into a new customer segment (14%). 

However, these prospects for growth go hand-in-hand with a rapidly evolving threat landscape that poses serious challenges to digital and financial security for both financial institutions and their customers. 

The financial services industry has been forced to address a number of rapidly evolving threats over the last several years. The evolving threat of external perpetrators of economic crime – manifested in the rise of customer fraud and platform fraud – has challenged the financial services industry to quickly assess and mitigate risks, all while operating in an unstable global context. 

These risks have been exacerbated by the process of digitalization that was driven forward by the Covid-19 pandemic. Digitalization now represents a key challenge – even risk – for financial sector industries. 

Overwhelming Rates of Change – The Challenge of Digitalization 

Wealth managers are reporting that 75% of firms are finding it especially challenging for their risk management functions to keep up with the speed of digital transformation. Firms report that external compliance pressures take up time and resources of risk functions and risk owners, as well as struggling with a lack of access to digital tools and enablers for risk management activities. 

The banking sector faces many of the same challenges. The need for investments in risk management technology is expected to increase as banks continue to gain scale. The speed of digital and other transformations is a significant or very significant challenge for risk management according to 79% of respondents. According to 74% of respondents, external and compliance pressures take up much of the time of risk functions and risk owners. Around 70% face time-consuming and costly manual risk processes, signaling a lack of access to digital tools for risk management.

“The ability to utilise and interrogate data is a key tool in the arsenal to detect changes in the risk landscape. The survey shows that companies are investing: Three-quarters of executives are planning on increasing spending across data analytics, process automation and technology to support the detection and monitoring of risks.”

In light of this new landscape, the banking and asset and wealth management sectors are increasingly looking to invest in process automation and new technology for risk assessment and risk management. 

The Rise of Risk Assessment – Greater Emphasis on Awareness and Mitigation 

Greater investment in technologies for risk assessment is a common trend throughout the financial services industry, but it is especially prevalent within the banking and asset and wealth management sectors. 

These trends are clear for banking respondents to PwC’ survey. 

• 41% of respondents in the banking industry expect to increase investments in risk management technologies by up to 10% in 2022, while another 24% of respondents expect to increase spending by more than 10%. 

• 79% will increase spending on the detection and monitoring of risks. 

• 74% will increase spending on workflow management. 

Similar trends manifest in the asset and wealth management industry. 

• 58% of firms plan to increase their spending on risk management tech, of which 73% of respondents report that all of this investment will be into technology and digital capabilities. 

• 37% are spending more on third-party risk management,

• 36% are investing more in KYC processes. 

Commenting on the drive for risk assessment tools, PwC recommends that businesses in the financial services industry investigate partnerships with third parties. 

“Find opportunities to outsource noncore competencies to third parties whenever possible, you won’t be able to keep all the skills you need in-house and respond quickly and appropriately to new risks.”

Process Automation – Tools for Cost-Saving, Efficiency and Security 

A common trend across the financial services industry is the increasing drive for process automation. The rapid development of process automation technologies has proven immensely beneficial for the financial services industry and still holds immense promise for the advancement of risk assessment and mitigation systems. PwC notes this, commenting that…

“Close behind are process automation technologies that help with the detection and monitoring of risks, and workflow management. These tech investments should help address two of the top challenges in managing risks in banks: lack of access to digital tools and time-consuming, costly, manual risk processes.” 

Recognizing the value of process automation technologies, investment in developing these capacities is a key objective for the banking and asset and wealth management sectors. 32% of asset and wealth management firms report wanting to increase process automation, while in the banking sector, 78% of respondents will increase spending on process automation. 

Notably, digital technologies now enable the automation of high-quality security protocols such as KYC checks and data validation procedures, saving time and money in the process.  

Commenting on the evolving demands placed upon the financial services industry by customers, PwC notes the increasingly invaluable role played by the FinTech industry… 

“Banks are aiming to produce smooth onboarding and service across channels, for customer and employees alike… Cloud and FinTech partnerships are becoming essential parts of the delivery strategy and experience.”

ThisIsMe provides leading automated digital onboarding solutions that ensure the highest levels of regulatory compliance and security while also providing a world-class customer experience. To find out how we can equip your business with the tools it needs, contact our team here. 

Automated Digital Onboarding, Risk Assessment and KYC Services for South Africa 

As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of advanced due diligence services can serve your business, book a demonstration by contacting our team here.