Page 9 - Internal Auditor Middle East - December 2017

Knowledge Update

A fundamental shift in the way

banks manage risk

A global bank risk management survey was operational streamlining to technology-
conducted by EY in collaboration with the driven transformation, 83% of banks are
Institute of International Finance (IIF) to focused on data analytics over the next three
explore key focus areas and challenges for years
banks as they move through three distinct
phases of a 15-year risk transformation · Plans to leverage new technologies to manage
journey. Following three key findings emerged costs are in various states of progression i.e.
from this year’s survey: digital and mobile infrastructure initiatives
are the most advanced, while banks are Workforce of the future
· After fully rationalizing structures and taking first steps to automation and machine
processes, banks will have to drive digital learning - The competing forces
transformation across the entire operations,
from customer to operations · As banks reinvent themselves using shaping 2030
technology to drive digital change in the
· Risk management functions should reinvent future, risk teams are also expected to do so
themselves to become enablers and drivers of
innovation and growth, leveraging technology Following are the five challenges for 73%
to do so banks:
· Cybersecurity is not ahead of regulatory i. Managing emerging risks and increased
matters as the top concern of Boards and competition think technology can never replace the
Chief Risk Officers ii. Leading a digital transformation of risk human mind
Banks are implementing technology- management
driven change
iii. Operationalizing three-lines-of-defense 70%
As the industry’s digital transformation models
has accelerated, banks will have to move
from exploring to implementing use of new iv. Managing non-financial risks cost-
technologies across the bank i.e. in the middle effectively would consider using treatments to
and back office. This will challenge bank’s v. Staying resilient and protecting against enhance their brain and body if this
risk functions to change how they have been cyber risks improved employment prospects in future
monitoring risk profiles of the bank and
facilitate innovation, and how they leverage
new techniques to be smarter, faster and more http://www.ey.com/gl/en/industries/
cost-effective. financial-services/banking---capital- 74%
markets/ey-bank-risk-management-
· As banks are taking action to cut costs, from survey-2017
Top changes to the COSO ERM Frame- are ready to learn new skills or completely
retrain in order to remain employable in
work: Enterprise Risk Management Inte- the future
Jobs at risk: automation by country
grating with Strategy and Performance 38% US

Why update the COSO ERM Framework? 1. A new structure is introduced
There are several reasons to update the COSO 2. Different benefits of ERM are explored
ERM Framework such as: 3. Focus on integrating risk management is 35% Germany
- The complexity of doing business is changing provided
4. Written from the perspective of business
- New risks continue to emerge at a faster pace
than has been seen in the past 5. A suite of new graphics is featured 30% UK
- Shifting customer behavior 6. Risk management at all altitudes of the
organization is explored
In the meanwhile, technology evolution as well
as increased need of transparency are straining 7. Dives into deeper discussions on challenging
strategic planning processes and operational topics 21% Japan
capabilities. These challenges requires that 8. Increased emphasis on culture
organizations need to take a new approach to 9. Evolving role of information technology is
managing risk which helps to create, preserve addressed
and realize value now and in the future. https://www.pwc.com/gx/en/services/
https://www.coso.org/Documents/2017- people-organisation/workforce-of-the-
Following are some of the key changes to the COSO-ERM-Integrating-with-Strategy-and- future/workforce-of-the-future-the-
Framework: Performance-Executive-Summary.pdf competing-forces-shaping-2030-pwc.pdf

DECEMBER 2017 INTERNAL AUDITOR - MIDDLE EAST 07