Top 5 Risk and Compliance Resolutions for Banking and Financial Institutions in 2024

Introduction

New year. New beginnings. New resolutions. 

It’s that time of the year again! For many of us, a new year means a time to start fresh, improve and better ourselves, and make big plans with renewed optimism and energy. The same goes for risk and compliance practitioners too, who are looking to drive risk effectiveness, improve efficiency, and thrive with a fresh approach and advanced technologies. 

In the world of governance, risk, and compliance (GRC), change is the only constant. As we step into 2024, banking and financial institutions are bracing themselves for the unknown unknowns stemming from escalating geo-political conflicts in various parts of the world, a grim economic outlook, intensifying cyber risks, severe supply chain disruptions, an array of new regulations, and more. 

In its 2024 Banking and Capital Markets Outlook, Deloitte said that the strategic choices made by banks will be tested this year as they will be confronted with “multiple fundamental challenges” to their business models. 

“A slowing global economy, coupled with a divergent economic landscape, will challenge the banking industry in 2024. Banks’ ability to generate income and manage costs will be tested in new ways,” the consulting giant noted. 

So, while the leadership and top management review the past year and chalk out business goals and strategies for the year ahead, GRC leaders should take this opportunity to rethink their approach and implement changes in processes, tools, and technologies that will boost their organization’s resilience. 

Against this backdrop, here are 5 key risk and compliance resolutions for banking and financial services organizations to help successfully navigate 2024. What are yours? Let us know in the comments!

1. See Risk as an Opportunity – A Must for Thriving in 2024!

Risk is an inherent part of business. Instead of viewing risk as detrimental to the organization’s growth and financial posture, banks should look to turn risks into opportunities. The willingness to take risks can help organizations gain a competitive edge and drive greater profitability and business value. However, there’s a catch – not all risks will translate into strategic advantage. So, how can financial institutions make the decision of whether to accept, reject, avoid, or mitigate a risk? 

This is where the risk management program comes into play. An effective risk management program can enable decision-makers to make well-informed business decisions by providing a streamlined process for evaluating opportunities. It equips the top management and leadership with actionable insights, improved risk visibility and foresight, and greater transparency that helps them better manage projects based on risk impact and probability in relation to potential return.

2. Step Up Cyber Risk Management – Automation is Key!

Banking and financial services organizations are a primary target of cyber criminals – which is unsurprising given the sheer volume of sensitive information and assets worth billions of dollars at stake. According to Sophos, the rate of ransomware attacks in financial services jumped from 55% in 2022 to 64% in 2023. 

To protect their IT and cyber infrastructure from frequent and increasingly sophisticated cyber attacks, banks need to level up their cyber risk management approach. Relying on periodic reviews and assessments of cyber risks and controls is no longer enough. To stay on top of rapidly evolving and fast-moving cyber risks, organizations need an automated, autonomous, and continuous approach that enables them to proactively identify and address any risks, threats, vulnerabilities, control weaknesses/gaps, and issues before they snowball into something significant. 

Banks today can also harness the power of artificial intelligence and other advanced technologies to improve risk management processes and enhance efficiency. AI can significantly accelerate the decision-making process by quickly providing insights into risk trends and patterns as well as identifying areas of improvement – such as the number of duplicate or redundant controls, patterns of over and under-testing of controls, optimum control testing frequency, similar issues, and more.

3. Level Up the Compliance Game – Time to Stop Playing Catch-Up!

Regulatory compliance is becoming an increasingly challenging and demanding business function for financial firms. Already counted among the highly regulated industries, the banking and financial services industry is looking at a torrent of new regulations, standards, and regulatory updates focused on various business functions and processes. Some of the prominent ones include revisions to the NIST Cybersecurity Framework, NYDFS Cybersecurity Regulations, a revised version of PCI DSS, and others in the US, the Digital Operational Resilience Act (DORA) and the Corporate Sustainability Reporting Directive (CSRD) in the EU, and so on. 

Given the ever-increasing regulatory requirements, compliance teams inevitably fall behind as they end up spending most of their time tracking relevant regulations, understanding their impact on organizational processes, functions, risks, policies, and controls, implementing the required changes, and so on. Technology can make a huge difference in how these various compliance management tasks are performed. 

Automated compliance is the future! Today, there are tools that leverage AI to scan the regulatory horizon for identifying relevant regulations and regulatory updates, quickly show the impacted processes, functions, risks, policies, and controls using a centralized platform, run autonomous control tests to ensure adherence to relevant regulations, generate reports that demonstrate compliance posture, and more. The technology-driven, automated approach can streamline compliance management activities and help strengthen compliance resilience. 

For a deeper dive into the top 10 key regulations we are watching this year, read our blog “What’s Next in GRC and Risk Regulations? 10 Key Focus Areas for 2024.” Let us know what other regulations and regulatory developments you are keeping an eye on in the comments below.

4. Implement AI for GRC and GRC for AI – Act Now or Lag Behind!

With its ability to provide actionable insights, save time and costs, and create bandwidth for risk, compliance, audit, security, and sustainability teams, AI is already being regarded as a game-changer for GRC. While AI will not replace the need for human involvement completely, it can eliminate the possibility of human error, thereby improving the accuracy of GRC processes and decision-making and ensuring there are no blind spots. 

At the same time, it is essential to ensure responsible AI innovation. As financial institutions explore more and more use cases and integrate AI capabilities into their processes, they also have the duty to follow the highest standards to ensure its ethical and responsible use as well as implement measures to identify, manage, and manage AI risks. Think GRC for AI, if you will. 

Regulators and standard-setting bodies have already taken steps toward this goal. In the US, the National Institute of Standards and Technology (NIST) last year released the NIST AI Risk Management Framework (AI RMF 1.0) aimed at improving the “ability to incorporate trustworthiness considerations into the design, development, use, and evaluation of AI products, services, and systems” while the White House published an Executive Order on the safe, secure, and trustworthy development and use of AI. In the EU, members of the European Parliament reached a provisional agreement on the Artificial Intelligence Act. 

AI-focused innovation has been central to MetricStream’s product and platform releases over the years. Our AI capabilities span diverse GRC use cases – from issue identification and classification, action plan recommendations, and scanning of SOC2 and SOC3 reports submitted to organizations by third parties, to most recently, AiSPIRE, an AI-based knowledge-centric tool that provides intelligent insights to improve an organization’s control environment.

5. Strengthen Operational Resilience – Connect the Dots!

The financial sector is the backbone of the global economy. As such, the growing focus of financial firms on operational resilience – the ability to foresee, prevent, withstand, respond to, and recover from risk events – isn’t surprising. 

Most recently, the COVID-19 pandemic served as a real-world test of the resilience of banking and financial institutions. The agility demonstrated by the organizations to quickly move their operations completely online and support remote working environments while ensuring security and compliance has been remarkable. 

That said, to thrive in today’s rapidly evolving risk landscape – marked with high-frequency, high-impact risk events, growing interconnectedness of risks, and amplified digital dependencies, organizations need to double down on their efforts to strengthen operational resilience. It is critical for banks to not only have robust business continuity and disaster recovery programs in place but also integrate them into the overarching enterprise risk management program. This is important to get a holistic, 360-degree view of the organization’s GRC posture, understand the critical business functions and their interrelationships with other business functions, and improve risk visibility, foresight, and preparedness required for being resilient.

Looking Ahead

“Don’t wait for perfection before you start. Start somewhere so you can have something tangible you can work to perfect.” 

This quote from Simon Sinek is relevant not only on a personal front but also in the corporate world. As the risk and regulatory landscape continues to evolve and become increasingly challenging, the need of the hour for banking and financial services institutions to embark on the GRC journey – start where they are, with what they have, and build on it. 

MetricStream has been a trusted partner of several global banking and financial institutions in their GRC journey. Learn how we helped a prominent EU-based financial institution strengthen risk awareness, agility, and resilience. 

If you’re looking to embark on your GRC journey and want to understand how we can help, request a personalized demo today!