The risk management landscape changed in 2023 due to rapid technological advancements and changing global dynamics. Key factors such as the growing impact of artificial intelligence and geopolitical uncertainties have presented both challenges and opportunities.
To address these challenges, we asked six of Protecht’s leading risk experts to summarise the key risk trends that emerged last year, how these are expected to continue into 2024, and in what ways 2024 will be different. Our panel consisted of:
- Nick Broome, Chief Customer Success Officer, Protecht
- Michael Howell, Research and Content Lead, Protecht
- Ryan Knapton, Head of Customer Success EMEA, Protecht
- Terry Lee, Vice President, North America, Protecht
- Gary Lynam, Managing Director, EMEA, Protecht
- Jared Siddle, Director of Risk, North America, Protecht
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What were the most important risk trends we saw in 2023?
In 2023, we saw a shifting risk landscape marked by the convergence of technological advancements and global uncertainties. This section considers the trends that emerged, highlighting how they have reshaped organisations’ approach to risk management. From the increasing complexities of cyber risks intertwined with AI developments, to the strategic integration of risk frameworks, these trends have led to transformations in how to best carry out risk management.
Cyber risks and AI challenges
The intersection of increasing cyber risks and the challenges posed by AI has been a prominent trend.
- Jared Siddle: "Cyber risks continue to increase – and this combined with AI will make threats even harder to detect."
- Michael Howell: "Cyber will continue to evolve across a few dimensions. Threats will continue to change, enhanced by the use of generative AI and automation by attackers."
Generative AI and data concerns
The rapid growth of generative AI has raised concerns regarding data privacy and the quality of AI outputs.
- Michael Howell: "Generative AI’s explosion in late 2022 and early 2023 grabbed many people’s attention."
- Gary Lynam: "Aside from the forthcoming AI regulations and the UK’s revised Data Protection and Digital Information Bill, risk and compliance teams must consider the opportunities presented by generative AI."
Integration of risk frameworks
Integrating existing risk frameworks with Business Continuity and Vendor Risk has been a focus area.
- Nick Broome: "The integration of existing risk frameworks with Business Continuity and Vendor Risk (CPS 230) has been very important."
- Gary Lynam: "In the UK, we’ve seen regulatory changes come into force with an emphasis on third party risk management to achieve operational resilience."
System replacement and vendor evaluation
There has been a trend towards system replacement and a critical evaluation of vendors for better configurability and support.
- Terry Lee: "North America saw a higher number of system replacement opportunities than in 2022... Common themes were lack of configurability, poor vendor support, and a dead-end roadmap where the vendor is not improving the product sufficiently."
Which will be the important risk trends continuing into 2024?
As we enter 2024, some of the key risk trends from last year will not only continue but also gain prominence. This section explores these evolving trends, focusing on how they are likely to influence the risk landscape in the coming year. Key areas such as the ethical dimensions of AI, its integration into products and services, and the movement towards consolidated reporting and single platform solutions are set to define this year’s risk management strategies.
Ethics, governance, and management of AI
The ethical, governance, and risk management aspects of AI are expected to rise in importance.
- Jared Siddle: "The rise of AI will bring ethics, governance and risk management requirements"
- Gary Lynam: "In 2024, organisations must build capabilities within teams to ensure the AI operating models and outcomes are fully understood and avoid any bias."
AI in products and services
The expanded use of AI in products and services will be a key trend, with a focus on governance and responsible use.
- Michael Howell: "There will be further consolidation of views on AI, particularly generative AI, as organisations move beyond experimental or individual use to more expanded use in products and services."
- Gary Lynam: "Support functions are often left behind when new technology change is introduced. This can’t be the case this time."
Consolidated reporting and single platform solutions
The trend will continue moving towards consolidated reporting and integrating solutions into a single platform.
- Terry Lee: "Interest in consolidated reporting increased... the trend has been to consolidate solutions into a single platform."
How will the risk landscape look different in 2024 compared to 2023?
The transition from 2023 to 2024 will bring some changes to the risk landscape, introducing new challenges and opportunities. This section provides insights into how these changes will take place, comparing the risk scenarios of the two years. It covers the anticipated evolution in model risk management due to AI, the impact of major global elections on geopolitical risks, and the growing importance of resilience roles and teams in organisations.
Model Risk Management and AI integration
The integration of AI in risk management will necessitate enhanced model risk management.
- Jared Siddle: "Model risk management will continue to grow globally, as companies have to provide evidence to regulators that they have adequate programs in place. This, combined with AI, will require all financial institutions to look at their model risk programs."
- Gary Lynam: "Ensuring that rigorous validation, testing, and audit processes are in place along with continuous monitoring is vital for organisations using AI."
Geopolitical risk in a major election year worldwide
The impact of major elections on the geopolitical landscape will be a key differentiator in risk between 2023 and 2024.
- Gary Lynam: “Next year is going to be the biggest election year in history for democratic societies, including the US presidential election in November 2024... the results will have a significant impact on an already fragile geopolitical and economic environment.”
- Ryan Knapton: "With the US and UK elections, and a number of EU elections, the time for manipulation is now, and how organisations respond will be key."
Growth of resilience roles and teams
The evolution of risk management will see the emergence of new senior leadership roles focused on operational resilience.
- Gary Lynam: “In 2024, new senior leadership roles that own operational resilience such as Chief Resilience Officer will feature more prominently... Resilience teams will play a more prominent role in third party risk management.”
Conclusions and next steps for your organisation
These insights from Protecht's experts make clear that the risk landscape is continuously evolving, shaped by technological innovation, regulatory changes, and global events.
The key trends in 2023, such as the challenges posed by AI and cyber risks, the integration of risk frameworks, and the critical evaluation of systems and vendors, have set a new benchmark in risk management. Moving into 2024, these trends will deepen, with a heightened focus on the ethical, governance, and management aspects of AI, the role of AI in products and services, and the importance of consolidated reporting and single platform solutions.
The growing emphasis on climate risk in ERM solutions and the impact of geopolitical events in a major election year underscore the need for adaptive and forward-thinking risk strategies. To stay ahead in this dynamic environment, it's essential for organisations to continuously update their risk management knowledge and practices: staying informed and agile is key to navigating the complexities of the risk landscape.
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