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In the highly regulated world of financial services, risk management is not just a necessity but a strategic imperative. This case study outlines the journey of a large, globally recognised financial services firm (henceforth referred to as "The Firm") in transforming its risk management framework. The Firm’s Board of Directors and Executive Team recognised the evolving nature of risks and embarked on a comprehensive risk transformation initiative.
Background
The Firm, with its international presence and a vast array of client types and financial products, was grappling with increasingly complex regulatory requirements and organisational structure. Its legacy risk and compliance management frameworks and systems, characterised by siloed operations and manual processes, were proving inadequate in effectively providing risk insights and ensuring regulatory compliance. Recognising these limitations and as requested by regulators, The Firm committed to a holistic transformation of its risk management practices.
Challenges Faced
Regulatory Compliance and Expectations: Keeping pace with the ever-changing regulatory landscape across different jurisdictions was a significant challenge. Regulators had expressed clear concerns and requested actions be taken.
Holistic Risk Management: The lack of standardised and holistic risk management frameworks prevented the firm to get a fact-based actionable understanding of its risks both at operational and strategic level.
Data Silos and Gaps: Fragmented data systems hindered a unified view of risks, leading to inefficiencies and potential oversight.
Technology Infrastructure: Outdated and fragmented technology platforms were unable to support advanced risk analytics and business decision-making.
Cultural Resistance: Shifting the organisational mindset from “historical” risk management to a more proactive, integrated and systematic approach required substantial change management efforts.
Solutions Implemented
The risk transformation programme focused on:
Strategic Alignment: Review the firm’s strategy and updated its risk profile to map-out capability and capacity requirements.
Capability Build: The Risk function underwent significant investments to build new capabilities across multiple risk disciplines and to expand its areas of expertise, especially in the non-financial risk discipline.
Capacity Build: The Risk function identified and addressed existing capacity gaps through reemployment of existing resources and talent acquisition, while strengthening its regional coverage and oversight.
Framework Standardisation and Integration: The risk, compliance and audit function went through a systematic standardisation of their risk related frameworks and integrated duplicative capabilities to ensure holistic and systematic coverage of risks.
Technology Integration: The Firm deployed global integrated solutions across Risk, Compliance and Audit decommissioning legacy systems and End-User Computing solutions wherever possible.
Data Consolidation and Analytics: Implemented an enterprise-wide data management platform to break down silos, enabling a holistic view of risk across the organisation.
Cultural Transformation: Initiated a top-down approach to foster a risk-aware culture, including comprehensive training programmes and performance metrics aligned with risk management objectives.
Outcomes Achieved
Regulatory “Green Light”: Before and foremost, the regulators acknowledged progress made and downgraded their level of oversight over the firm.
Improved Risk Visibility: Consolidated data and systematic coverage of risks provided actionable strategic and operational insights, enabling proactive risk management.
Operational Efficiency: Streamlined processes and modern technology infrastructure reduced operational complexities and costs.
Risk-Aware Culture: The Firm successfully embedded a culture of risk awareness, driving better decision-making at all levels of the organisation.
The Firm's journey in transforming its risk management framework showcases the imperative of embracing change in the face of evolving risk landscapes. By integrating advanced technologies, consolidating data, and fostering a risk-aware culture, The Firm not only strengthened its position against potential threats but also harnessed risk management as a strategic enabler for growth. This case study serves as a testament to the fact that in the realm of financial services, proactive and integrated risk management is not just about safeguarding assets but is fundamental to driving business resilience and strategic delivery.
Ready to embark on your own risk transformation journey? Our team of experts at Aevitium LTD is dedicated to guiding organisations through the intricate process of enhancing risk management practices and achieving operational excellence.
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