This article was first published by Oliver Wyman here.
This report was written in collaboration with the Risk Management Association (RMA). An external author of this piece includes Edward DeMarco (RMA).
This year's edition focuses on managing the competing demands of financial, non-financial, and strategic risks.
In 2021, the world economy appeared to stabilize following the immediate impact of the COVID pandemic. By the end of the year, annualized U.S. GDP was up 5.7%, the strongest pace since the 1980s. At the same time, disruption topics dominated the headlines. Wildfires burned across the country, highlighting the risk of climate change. Labor force dynamics shifted dramatically to favor workers due to post-COVID labor shortages. For banks, the remote working environment and high-profile security breaches made cybersecurity a high priority. Risk management was not easy, but with a stable economic backdrop, banks could focus on building out capabilities for managing non-financial risks and preparing for strategic risks on the horizon.
Now, banks are entering choppier waters as some risks remain elevated and others re-emerge. After a period of more benign economic conditions, financial risks once again require greater priority as the macroeconomic outlook worsens. At the same time, the drivers that elevated non-financial risk in recent years persist. On top of these, banks cannot ignore the ongoing threat of new competitive entrants, evolving customer expectations, and other strategic risks.
This year’s survey confirms that CROs feel these tensions and are increasingly stretched. Last year, CROs were heavily focused on non-financial and strategic risks. This year, financial risks have emerged as top priorities in addition to non-financial and strategic concerns. Looking ahead, CROs will have to navigate a complicated balancing act between financial, non-financial, and strategic risks as they help steer their banks through the challenges ahead.