The UK financial services industry continues to deal with the legacy of 2020 on business operations and the way customers access financial services. As a return to some form of normality remains stubbornly distant, here are five critical risk management challenges to consider as 2021 gets underway.

1. Nonfinancial risks

Cybersecurity, vendor risk, and conduct risk are just some of the nonfinancial risks that have recently been pushed into the spotlight. Although firms have managed these risks in a limited capacity over the past decade, the pandemic amplified the impact into much larger issues for boards and organisations. Financial institutions that were unable to quickly and easily pull together risk data were at a significant disadvantage with the rapid pace of COVID-19 developments.

This is the time to right the wrongs of last year. Integrate nonfinancial risks into broader risk management practices by breaking down silos, increasing risk awareness, and improving the transparency of information across business units and departmental lines. Taking an integrated approach to risk management will help you operate with greater agility and speed up decision-making.

2. Outdated technology

With in-person contact off limits, customers turned to technology to take out loans, apply for mortgages, and renew insurance policies.

As it is highly likely many of these new buying habits will become permanent, risk management must similarly evolve with updated, integrated technology that provides better insight into the increased risks of online tools and visibility on the full impact on organisation. AI, analytics, and other next-generation tools can quickly pull salient data for fast action. Technology also increases the efficiency of the risk team by streamlining day-to-day workflows.

3. Regulatory compliance

Regulation continues to grow in scale and complexity, which is becoming a real headache for financial services organisations across the globe.

Compliance with the UK’s Senior Managers & Certification Regime (SMCR) will be the most pressing priority for many organisations. The new FCA deadline requires that fit and proper assessments for staff members in the certification regime category be submitted by the end of March. Beyond that, keeping up with the pace of regulatory change takes a technology solution that can efficiently single out relevant regulations. With more intelligent regulation tracking in place, compliance teams also can apply more effective policy management in different areas of the business.

4. Operational resilience

Operational resilience has been a topic of great discussion for several years. Consultation papers and a shared policy summary released by the FCA, PRA, and Bank and England highlighted the need for financial institutions to better position themselves to handle the impacts of inevitable business disruption.

The COVID-19 pandemic brought these discussions to the forefront. Regulators have now released guidance for financial services institutions to begin building operational resilience into existing operational risk practices. Applying this guidance, however, can put a strain on time and resources.

The key to efficiently building operational resilience is to leverage existing frameworks, tools, systems, and functions. For instance, organizations that already have a GRC solution in place can integrate operational resilience into what is already being done in the system.

5. Brexit

Many organisations are relieved that a trade deal between the UK and the EU was reached. However, the details around how this affects the financial services industry remains uncertain.

Many decisions have yet to be made on how UK firms will operate long term within the EU and vice versa. The current Brexit trade deal does not include an EU-wide arrangement for financial services, leaving UK firms in the position of having to negotiate a patchwork of individual EU nation’s regulations. Financial services organisations must be able to identify their potential exposure to Brexit and the impact of decisions made by governing bodies on various facets of the business, such as trade partnerships, supply chains, and even how the firm inherently sells to EU-based customers.

While there are bound to be some surprises in 2021, having the processes and systems in place to proactively address known risks will leave you better positioned to weather whatever the year may bring.

For more, check out Operational Resilience Basics: What You Need to Know about UK Regulation.