As the financial services industry continues to evolve, risk and compliance functions are facing unique challenges. At the forefront of this evolution, Chief Risk Officers (CROs) are working tirelessly to ensure that their organisations remain compliant with regulatory requirements while also protecting customers and stakeholders. We’re in constant dialogue with many risk and compliance leaders within the industry. Over the past 6 months, we’ve seen some common themes emerge in our discussions. In this post, we’ll explore five of the most pressing trends that CROs are grappling with:
Budgets cuts with increased responsibilities
One of the most challenging trends is balancing the need to manage growing risk with the constraints of limited resources. CROs are facing pressure to do more with less, as budgets continue to be cut. This is making it increasingly difficult for compliance functions to keep pace with the rapidly changing regulatory landscape. To overcome this challenge, CROs are looking to technological innovation to find new ways to make the most of their current resources rather than increasing headcount.
Increasing regulatory pressure
Another trend that has emerged over the past 6 months is the increasing regulatory pressure that CROs are facing. The Consumer Duty deadline of July 31st is just one example of the numerous, and fairly significant, regulations that CROs must navigate. Unfortunately, many organisations are not where they need to be in their implementation plans, and this is creating a certain amount of urgency and uncertainty.
Growing focus on vulnerable customers
With the ongoing economic and energy crisis pushing more and more people into debt, it’s no surprise that the focus on vulnerable customers is growing. In fact, according to the FCA’s Financial Lives survey, 24% of UK adults have low financial resilience and a staggering 47% of UK adults show one or more characteristics of vulnerability.
CROs are facing pressure to ensure that their organisations are serving the needs of these customers, not just from a moral standpoint but also from a risk management perspective. The fines and reputational damage that can result from not serving vulnerable customers properly can be devastating, as we’ve all seen from the recent British Gas investigation into forcing prepaid metres onto vulnerable customers. It’s clearly an area CROs must prioritise.
Requirement for greater risk coverage
As the regulatory landscape continues to evolve to be more data-driven and require a more comprehensive view across the customer’s lifetime, CROs are facing the challenge of providing greater coverage with existing resources.
To put this into perspective, if a company has a QA team of 5 people on an average salary of £40k, monitoring 2% of all calls but the company’s coverage goal under Consumer Duty is 15%, for human-only delivery, that’ll result in an extra £1.3M in headcount.
One of the consequences of Consumer Duty is that firms will need to take a much deeper review into each case so each assessment will take longer resulting in fewer calls being reviewed. Where AI can make a real difference here is that speech-driven NLP platforms can run automatic assessments of every call, flagging incidences that human teams need to take a look at. This means assessor time is strictly focused on only the highest risk interactions.
Stricter approach to ROI
The final trend that we’ve noticed in our conversations with CROs is the growing focus on return on investment (ROI) when it comes to investing in new technology. CROs are becoming much more stringent in their requirements, demanding tangible proof of the ROI that new technology will deliver. This is a reflection of the ongoing pressure on risk and compliance functions to manage their resources effectively and ensure they’re providing maximum value to the organisation. By taking a more measured and strategic approach, CROs are helping to ensure that their tech investments deliver real business value not just in the short term, but well into the future.
As CROs continue to navigate the many challenges of operating in a tough economic backdrop, these trends represent some of the most pressing issues they are tackling. From budgets cuts and increased regulatory pressure to the need for greater risk coverage and a focus on vulnerable customers, CROs have their work cut out for them. However, with the right tools and tech, CROs can be well equipped to meet these challenges head-on and make good on ambitions to put data-driven strategies at the heart of their company’s operating model.
