Having navigated the Coronavirus pandemic’s disruption, the banking industry faces a new era of volatility and uncertainty. Soaring interest rate and liquidity risks have toppled eight banks since 2023. Credit risk looms large amidst geopolitical tensions and the squeeze of inflation. Regulatory change and complexity abound. To effectively confront the mounting challenges, a global risk management survey from FT Longitude and data and AI leader SAS reveals that:

    75% of banks intend to increase investment in risk technology infrastructure (up from 51% in 2021)
    64% plan to augment spending on third-party software (vs. 43% in 2021)

The new benchmarking report, Transforming Risk Management, is based on insights shared by 300 senior banking risk management leaders in 25 countries, surveyed in October 2024. A follow up to a like joint study published in 2021, this latest report shows a striking rise in banking leaders’ prioritisation of risk management innovation, underscoring the critical role of technology in helping banks overcome adversity and build resilience.

In-depth interviews with risk management executives at large multinational banks add rich context to the survey data. The report features perspectives from risk officers at Capital One, Commerzbank, General Bank of Canada and Santander Portugal.

“Banks can no longer take decisions relating to liquidity, capital or credit risk in isolation,” said Carlos Diaz Alvarez, Chief Risk Officer of Santander Portugal. “We can extract key information from separate systems to make holistic decisions, but we need more granularity and integration.”

“Our research finds that banks took some vital steps forward over the past three years to build resilience,” said Thomas Sturge, Group Editor at FT Longitude. “But they can’t get caught comfortable. Ongoing turbulence means they must constantly modernise, improve and transform how they detect, manage and mitigate risk. Those that do will be rewarded not just with improved resilience, but also greater customer satisfaction and, ultimately, revenue.”

Five key takeaways

SAS has also published a data dashboard that allows users to explore the study’s findings by region, institution type and asset size. Available at SAS.com/risksurvey, the tool adds depth to five overarching study findings:

    Investment in risk technology capabilities is growing significantly. In addition to the burgeoning investment in technology infrastructure and third-party software noted previously, 65% of banks plan to engage third-party consultancy and advisory services, up 15% since 2021.
    Risk modeling is a foremost focus for banks as they contend with regulatory change and seek to automate risk processes. Two-thirds (67%) of banks plan to advance their risk modeling capabilities over the next two years (vs. 54% in 2021). Further, the percentage of execs who regard risk modeling as a competitive advantage has surged to 63%, from 47% in 2021. Among those in EMEA, and those with $20 billion to $50 billion in assets under management (AUM), 72% see risk modeling as a competitive advantage.
    The use of AI, including newer generative AI tech, remains mixed, despite the great promise and potential. Only a minority of banks report widespread use of AI for functions like risk management (40%), risk modeling (30%) and fraud detection (36%). Fewer still report using GenAI for these functions: risk management (17%), risk modeling (16%) and fraud detection (24%). American banks lead their EMEA and APAC counterparts in the use of AI and GenAI for each of these functions, while APAC banks use AI and GenAI the least for these functions. A lack of skilled talent is the top barrier to fully adopting AI, cited by 50% of respondents across regions.
    As banks face a veritable data explosion from multiple sources, effective data management and data governance frameworks have never been more essential. The executives surveyed see improved risk management (64%), improved customer experience (55%) and improved fraud detection (51%) as top benefits for consolidating customer data. Yet only 14% intend to significantly consolidate customer data, and fewer than half (44%) say the same for non-customer data. Of note, data consolidation plans vary considerably by AUM and region.
    Banks of all sizes, and in all regions, continue to grapple with their asset liability management (ALM) systems and capabilities – and most plan to enhance them. Only about 1 in 5 risk execs surveyed report they are “very satisfied” with their ability to manage liquidity risk (22%) or with their ALM systems (20%). Roughly 8 in 10 report they are either implementing next-generation ALM solutions (38%) or making comprehensive enhancements to their ALM functionalities (41%). Overwhelmingly, integrated balance sheet management (IBSM) is a high aspirational goal of surveyed executives; 77% plan to invest in IBSM that enables them to better assess the impact of interest rate risk and credit risk. American banks and large banks lead the way in ALM integration.

“With risks impacting financial institutions more interconnected than ever before, firms need a singular, AI-powered platform that allows them to evaluate risks across the balance sheet and perform more holistic stress testing,” said Stu Bradley, Senior Vice President of Risk, Fraud and Compliance Solutions at SAS. “Those that replace outdated systems and infrastructure with a more integrated, enterprise-wide approach will see benefits across functions and enable better, more strategic decision-making.”

Go beyond the key takeaways and discover how banks are transforming risk management by downloading the latest collaborative research report by SAS and FT Longitude at SAS.com/riskreport.

Watch the on-demand webinar Adaptive Risk Management in Banking: Navigating Complexity with Agility for a forward-looking discussion led by FT Longitude and SAS on the future of banking risk management.

About FT Longitude

FT Longitude is a specialist thought leadership agency that is owned by the Financial Times. We combine strategy, research, content and activation services to produce real thought leadership that enables our clients to genuinely influence and inspire their audience. We work with a wide range of the world's most prestigious B2B brands across Europe, the US and Asia Pacific.

About SAS

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