3 out of 4 risk experts lack confidence in financial institutions processes to prevent a future crisis

Over half say regulatory reforms will not prevent another crisis

The survey found that just over half of respondents (51%) still do not believe that current regulation will be better able to prevent another crisis than those that were in place in 2007. This figure rises to 57% when considering only those working directly in the industry. The consensus is that a proactive and prescriptive approach from regulators will actually help risk management, with 68% of respondents holding this view. Only 21% believe more active regulation will hinder risk management.

Integrated, accurate data the greatest challenge for managing risk

The survey results clearly highlight that having better quality information is the greatest challenge financial institutions face in managing risk. 27% of all those questioned and 34% of industry practitioners said that “harmonising data, analytics and reporting across the business” was the single biggest challenge of regulatory implementation.

Banks expected to pass costs on to clients

When asked whether they thought financial institutions would pass on increased costs related to the regulatory changes (due to the consequent higher capital and funding overheads) to clients, three-quarters of respondents said that they expect financial institutions to do so.

Mark Connolley, Capco UK Finance, Risk and Compliance Lead & Partner comments: “The recent crisis showed just how important high quality risk management is. Yet we clearly have a way to go to achieve a robust framework for regulation that does not stifle growth. There is a sense of agreement among industry practitioners and academics that implementing effective risk management processes remains a challenge for a number of financial institutions.Nevertheless the survey shows that experts agree that regulation has a place in assisting the creation of a better risk framework. To position themselves for future success, institutions still need to conduct wholesale change in how they handle risk.”

Professor Steven Haberman, Deputy Dean of Cass Business School added: “These insights show that despite the lessons of the financial crisis, the sentiment among risk practitioners and academics remains that the regulatory reforms alone will not do enough to reduce risk in the system. The Cass-Capco annual conference is an important opportunity for experts working in risk management to come together to debate and refine thinking on risk management in the financial services industry. These discussions are vital to ensuring that we have a safer financial system globally.”