15 June 2015
Reporter: Becky Butcher

Willis: Regulation, IT costs and macro-economics biggest risks

Regulatory pressures, rising costs from new technology and macro-economic factors are three biggest risks on the minds of senior C-Suite executives in the global finance sector, according to new research carried out by Willis Group Holdings.

The research identified six key “mega trends” which, together, are changing the financial sector. They include regulatory change and complexity, which is rank highest by C-Suite executives across the globe, both in terms of significance of its impact on the financial sector.

Other mega-trends dominating the minds of C-Suite, according to the research include, “digitisation and technology”, “global talent and skills race”, “changes in investment and capital sources and returns”, “demographic and behavioural changes” and “business operating model pressures”.

The research also identified associated risks caused by the mega trends. Quantitate easing and inflation/deflation was identified by the C-Suite as the top priority risk above all others.

This risk, associated with the “changes in investment and capital sources and returns” megatrend, achieved the highest composite score, 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.

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

The survey also revealed that only a minority, at 40 percent, of C-suite executives believe that the financial sector’s ability to manage risk has materially changed for the better over the past 12 months.

This 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.

Mary O’Connor, global head of Willis’s Financial Institutions Group, commented: “The past five years have provided a 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."

“Financial technology (fin-tech) 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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