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Regulation, IT costs and macro-economic factors of biggest concern to global C-suite executives: Willis


June 15, 2015   by Canadian Underwriter


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Regulatory pressures, rising costs from new technology and macro-economic factors are the three biggest risks weighing on the minds of senior C-suite executives in the global financial sector, according to new research by Willis Group Holdings, the global risk advisory, re/insurance broking and human capital and benefits firm.

The inaugural Willis Financial Institutions Risk Index was based on a global survey of more than 150 senior C-suite executives

The inaugural Willis Financial Institutions Risk Index, released on Monday, was based on a global survey of more than 150 individuals. It captures the consensus view of senior C-suite executives charged with running global banks, insurers, reinsurers, asset managers, hedge fund and financial technology (fin-tech) firms, and measures how these corporate leaders perceive risks now and into the future, Willis said in a press release.

The research identified six key “mega-trends” which, together, are changing the financial sector, according to the report. Foremost amongst these is “regulatory change and complexity” – which is ranked highest by C-suite executives across the globe, both in terms of the significance of its impact on the financial sector and the difficulty of managing the impact. [click image below to enlarge]

Mega-trends included regulatory change and complexity, digitalization and technological advances, global talent and skills race, changes in investment and capital sources and returns, demographic and behavioural changes and business operating model pressures

Other mega-trends include: digitalization and technological advances, global talent and skills race, changes in investment and capital sources and returns, demographic and behavioural changes and business operating model pressures.

More precisely, the research also identified several associated risks caused by these mega-trends. Quantitative easing and inflation/deflation was identified as the top risk priority above all others. This risk, associated with the “changes in investment and capital sources and returns” megatrend, achieved the highest composite score (12.96 out of 20) – based on how the risk was ranked by C-Suite respondents in terms of severity as well as how easy it was to manage the risk.

The risk of increasing costs associated with IT infrastructure ranked second by the same measure (12.36). Regulatory pressures prompting people to leave the sector or to move to lightly regulated firms was ranked third (12.32) out of a total of 31 risks in the survey.

The remaining top ten risks were overwhelmingly dominated by risks associated with just three megatrends: digitalization and technological advances, regulatory change and complexity and global talent and skills. [click image below to enlarge]

Regulatory change and complexity was ranked highest by C-suite executives in terms of impact on the financial sector and difficulty managing the impact

The survey also revealed that only a minority (40%) of C-suite executives believe that the financial sector’s ability to manage risk has materially changed for the better over the past twelve months. “This startling finding suggests the sector still has much to do to build the resilience it needs to face the risks of today as well as future shocks,” the release said.

Mary O’Connor, global head of Willis’s Financial Institutions Group, said in the release that the “the index demonstrates that the financial sector is being squeezed between two types of risk: on one side, the growing demands of governments, regulators and clients; on the other, unparalleled economic volatility and instability.”

She added that the past five years have provided a daunting challenge to traditional financial services institutions and the professionals who run them. “New pressures have emerged. Mobile banking is changing the way a new generation interacts with its financial providers, for example,” O’Connor said. “Financial technology firms are using online digital platforms to slash overheads and offer cheaper alternatives to traditional banking clients. Meanwhile, financial regulations weigh heavily on incumbent banks while non-bank financial institutions and fin-tech firms have flourished under ‘light touch’ regulation.”


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