The accelerating pace of technological change is the most creative force – and also the most destructive – in the financial services ecosystem today.
Therefore, we are not surprised risk predictions by business leaders in November 2018 for six months’ time identified cyber (48%) as their number one risk in 2019, and technology risk as their number three (43%).
The financial services industry has seen drastic technology-led changes over the past few years. Many executives look to their IT departments to improve efficiency and facilitate game-changing innovation – while somehow also lowering costs and continuing to support legacy systems.
Meanwhile, FinTech start-ups are encroaching upon established markets, leading with customer friendly solutions developed from the ground up and unencumbered by legacy systems.
Arguably the biggest risk to all of this is the threat of a cyber-attack and while cyber security becomes better and more advanced on a daily basis, so do the hacking attempts.
After cyber, business leaders in the financial services sector pointed to economic risk (47%) as another predicted top risk area. The financial sector in any world economy has deep-rooted ties with economic performance.
The performance of financial services companies is closely tied to interest rates and other macroeconomic indicators and we would expect economic risk to always be near the top of sector’s risk register – even more so in these uncertain times. Brexit, trade wars, a growth recession in China, a rise in global long-term real interest rates and a crescendo of populist economic policies are all expected to play their own role in the global economic performance in 2019.
However, despite the myriad of risks presented by technological and economic developments, confidence in the sector is bullish, with business leaders predicting confidence levels about their ability to grow and prosper to rise by almost 10% from 64% to 75%.