Financial services tech risk radar
Financial services organisations are navigating an increasingly complex technology risk landscape. Rapid innovation, evolving regulation and rising expectations from consumers and stakeholders are putting pressure on firms to accelerate digital transformation and adopt emerging technologies. Yet in doing so, they face heightened exposure to cyber threats, operational vulnerabilities, data governance challenges and regulatory pressures.
This radar gives a clear snapshot of where financial services firms must strengthen resilience, sharpen risk management and enhance oversight across their technology estate and third‑party relationships.
The radar looks at whether the risks are known or unknown to the firm and if they are driven by internal or external factors to determine where on the radar they sit.
Top five technology risks in financial services
Cyber attacks are increasing across sectors, and rapid technological innovation means they look set to continue rising. Protecting consumers and businesses against them remains a focus of regulatory and industry bodies, and a priority for stakeholders who expect stronger defences. Gaining coverage of the full estate for cyber protection and financial malware, as well as addressing backlogs in dealing with vulnerabilities are key challenges.
Organisations need to consider newer AI-enabled threats. Non-human agents that can bypass current authentication mechanisms are now carrying out social engineering, cloning and credentials compromise.
Boards and executives are seeking closer assurance over cyber risk management, including at third parties and on cloud services. Similarly, regulators are demanding closer supervision of third parties and cyber information and intelligence sharing, supported by robust cyber incident management.
To improve focused cyber risk management and cyber resiliency, organisations need effective threat intelligence and risk management that covers:
- Geopolitical awareness.
- Cyber risk quantification.
- Cyber awareness and training.
- Industry collaboration.
- Continuous monitoring.
- Sharing of information.
Change and project related incidents are major drivers of operational disruption. Embedding security and resilience into technology transformations is essential to maintaining operational continuity and preventing breaches.
Weak project and third party risk management, misaligned requirements and deliverables, poor contract oversight and legacy infrastructure constraints can all lead to gaps in cyber security. To improve risk control and project discipline during technology transformation, organisations should implement a robust programme management framework and strengthen third party oversight.
Regulators in the UK and EU are looking closely at the operational and cyber resiliency of firms in financial services to protect market integrity and consumer confidence. They are paying particularly close attention to firms’ ability to manage IT and communication services with third parties and share information safely.
Financial services firms need to build on the operational resilience governance and control frameworks they have built. Next steps should be to:
- Carry out plausible scenario testing.
- Manage third party risk.
- Put in place robust incident management and information sharing.
Data is a key asset that requires a clear strategy and governance across an organisation to manage and protect it. Breaches can come from a lack of effective data governance and risk management, asset management and third-party risk management.
Data analytics and AI are increasing in commercial value for businesses, with related security and reliability considerations dependent on sound data governance practices. Organisations need to adapt through the development of premium services, better adoption of AI and innovation, all of which can increase expertise and trust for the client.
Financial services providers are operating within an increasingly complex regulatory environment. UK and EU regulatory and industry developments around AI, operational resilience, third party risk management and payments continue to evolve, as does legislation. Firms will need to adapt how they are set up to comply with regulations and avoid penalties while maintaining commerciality and competitiveness.
This shift presents an opportunity to improve resiliency arrangements, incident management and anti-fraud measures, but brings a challenge in maintaining compliance with data protection requirements.
For more information on tech risks within financial services and how to protect your organisation, please contact Sheila Pancholi and Riza Unal.