Financial services sector’s top concerns revealed – AGCS report
Financial services sector’s top concerns revealed – AGCS report | Insurance Business Australia
Insurance News
Financial services sector’s top concerns revealed – AGCS report
New report examines biggest risks for the industry
Insurance News
By
Ryan Smith
Cyber incidents, macroeconomic developments, and changes in legislation and regulation are the top risks for financial services companies, according to a new survey by Allianz Global Corporate & Specialty (AGCS).
The publication of AGCS’s Global Industry Solutions Financial Services Outlook follows the release of the Allianz Risk Barometer 2023 in January. The latest release is one of several risk trend briefings for specific industry sectors.
Cyber incidents ranked as the top overall risk for companies, the report found.
“Despite investing in significant levels of cybersecurity spend each year, respondents view the FS industry as highly exposed,” said Martin Zschech, global industry solutions director for financial services at AGCS. “The main threat for financial institutions is the attempt to repossess the assets they hold. This can be achieved in multiple ways – for example, through impersonation, cyber attack or falsified electronic correspondence.”
Cyber attacks
The banking industry alone saw more than a 1,300% increase in ransomware attacks in 2021, AGCS said.
“Attack methods can evolve quickly,” Zschech said. “For example, open-source AI tools can be used to craft highly personalised spear-phishing attacks. At the same time, the growing reliance of companies on third-party providers such as cloud computing services means they can be vulnerable to cyber attacks that have a knock-on effect across the financial system.”
Training and technology can help mitigate the risk of cyber attacks by miniiszing human error, AGCS said.
Macroeconomic woes
Financial institutions are also feeling the impacts of macroeconomic developments. Inflation is likely to be one of the most challenging risks, particularly its long-term impact, AGCS said.
Inflation can mean that investments take time to regain value even after the economy seemingly recovers, AGCS said. It also slows down loan demand and increases the risk of loan default.
Restrictive monetary policy in response to inflation also challenges banks by essentially removing diversification, according to Allianz Research.
Regulatory compliance
Compliance is another of the biggest challenges for financial services companies, with regulation around digitalisation, climate change and ESG factors constantly evolving, AGCS said.
“The compliance burden for financial institutions has increased significantly over the past decade,” Zschech said. “…The growing focus on ESG topics offers the opportunity for many FS companies to step up and lead when it comes to investing in people and the planet, but regulations and guidance will still be a driver of risk going forward. Ultimately, the multiple regulatory and reporting challenges facing financial institutions requires them to improve the effectiveness and efficiency of their compliance activities and put data and technology to clever use.”
Other recent reports from Allianz found that cyber risks were the main concern in the tech and media sector, while business interruption and natural catastrophes topped the list for construction and engineering firms.
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