New report examines the biggest risks for the sector
By Ryan Smith
Cyber incidents, macroeconomic developments and changes in legislation and regulation are the top risks for financial services companies, according to a new survey by Allianz Global Corporate & Specialty (AGCS).
The GATS publication Global Industry Solutions Financial Services Insights follow the launch of the Allianz Risk Barometer 2023 in January. The latest release is one of several risk trend reports for specific industry sectors.
Cyber incidents ranked as the top overall risk for businesses, The report found.
“Despite investing in significant levels of cybersecurity spending each year, respondents view the FS industry as highly exposed,” said Martin Zschech, director of global industry solutions for financial services at AGCS. “The main threat to financial institutions is the attempt to recover the assets they own. This can be achieved in multiple ways, for example, through spoofing, cyber-attacks or forged electronic correspondence.”
The banking industry alone saw a more than 1,300% increase in ransomware attacks in 2021, AGCS said.
“Attack methods can evolve rapidly,” Zschech said. “For example, open source AI tools can be used to create highly customized phishing attacks. At the same time, the increasing reliance of companies on external providers, such as cloud computing services, means that they can be vulnerable to cyber attacks that have a ripple effect throughout the financial system.
Training and technology can help mitigate the risk of cyberattacks by minimizing human error, AGCS said.
Financial institutions are also feeling the impacts of macroeconomic developments. Inflation is likely to be one of the most challenging risks, particularly its long-term impact, AGCS said.
Inflation can mean that investments take time to recover value even after the economy appears to recover, AGCS said. It also slows the demand for loans and increases the risk of default.
Tight monetary policy in response to inflation also challenges banks by essentially eliminating diversification, according to Allianz Research.
Compliance is another of the biggest challenges for financial services companies, with regulation around digitalization, climate change and ESG factors constantly evolving, AGCS said.
“The compliance burden for financial institutions has increased significantly over the past decade,” Zschech said. “…The increasing focus on ESG issues offers the opportunity for many SF companies to step up and lead when it comes to investing in people and the planet, but regulations and guidance will continue to be a risk factor in the future. Ultimately, the multiple regulatory and reporting challenges financial institutions face require them to improve the effectiveness and efficiency of their compliance activities and make smart use of data and technology.”
Do you have something to say about this story? Let us know in the comments below.
Keep up with the latest news and events
Join our mailing list, it’s free!