Untimely adoption may drive sudden changes to information security, change management, business continuity and third-party risk exposures
Emerging technologies are perceived as the biggest emerging risk for financial institutions, followed by climate risk and geopolitical tension in second and third place, according to a study by ORX.
Cybercrime is expected to evolve in a similar way to digital transformation. As technologies emerge and transform the industry, they bring with them novel and unexplored potential for cyber criminals to exploit a wider surface area of vulnerabilities.
Dr Luke Carrivick, director of Research & Information at ORX said: “The speed of digital transformation, whilst already evolving at a rapid rate, has been accelerated by the Covid-19 pandemic, with major disruption to industries and how businesses operate.
”Digitalisation brings a host of benefits for the sector, but good operational risk management and practice is essential if your organisation is to make a successful transition to, and continue to operate well in, a digitalised world.”
He added: ”What is most interesting is to see how the risks are interrelated. For example, as physical climate risks materialise, geopolitical risks, such as the risk of failing states, may become a key concern and potentially drive new cyber threats.”
Some of the primary risk concerns around emerging technologies include:
- Technologies are emerging at different rates, for example Biometrics are already widely used and many of the impacts of adopting this technology are well-known, whereas quantum computing’s prospects to disrupt remain largely theoretical.
- Risk profiles will be impacted if businesses fail to adopt technology at the appropriate time. Untimely adoption may drive sudden changes to information security, change management, business continuity and third-party risk exposures.
- Open banking APIs have the potential to drive transformational industry change and dynamic market competition and innovation. Traditional market players will have to ensure products and services remain competitive against disruptive market entrants.
- Digital currencies are becoming widely adopted as we see changing consumer attitudes towards cash and the rapid emergence of fintech disruptors. As Sweden’s central bank progresses its e-krona exploratory framework to the next stage, a potential transformational change in this space is a step closer to becoming reality.
Risks identified with climate and geopolitical tension include:
- Concerns around stranded assets (ie, assets requiring early write-down) and reputational factors surrounding how institutions respond to climate change remain the primary focus areas.
- Specific operational concerns are also now being considered, such as adapting to a low carbon future, regulation, model risk, geopolitical, macroeconomic and physical risks such as operational resilience, natural disasters and people risk.
- Geopolitical tension may drive additional cyber threats to industries. Cyber warfare and acts of politically motivated cybercrime have the possibility to impact businesses and the wider system.
- Another economic crisis could trigger social unrest and a further soaring of unemployment rates and impacting skills shortages further into the future.
Dr Carrivick continued: “The way in which we view emerging risks is changing. Now more than ever we are understanding them via a set of interconnected emerging risk factors, which can be continuously monitored to account for the rapidly changing environment.”