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Geopolitical tensions top list of concerns for UK FinTechs and Financial Organisations

By Puja Sharma

December 07, 2023

  • AI
  • Bank Security
  • Compliance Risk
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FinTechSurvey Highlights Increased Investment in Operational Resilience, Strategic Technology Alignment and Impact of Generative AI in the UK Financial Sector 

Protecht, a leader in risk and resilience software, today announced the findings of its ‘UK 2024 Financial Services Risk and Resilience Outlook’ research. The comprehensive survey, conducted amongst 400 key UK financial organisations, reveals an industry landscape increasingly impacted by geopolitical risks, significant investment in operational resilience and the major opportunities presented by technological and data strategy alignment across the sector.

The survey, conducted across UK financial organisations of between 250-5000 employees, reveals that 26% of respondents view geopolitical events, including the aftermath of Russia’s invasion of Ukraine and tensions between the US and China, as the most critical risk area for the sector. This was followed by the risks presented by liquidity and access to capital, which was the top concern for 24%.

Tsambika Jeffries, VP, Enterprise Operational and Financial Risk, Zepz said: “The findings of the report do resonate for firms like ours; geopolitical uncertainty can impact us around the globe and operational resilience has been a key area of focus. As a FinTech, we embrace new technology and are constantly striving to find ways to increase automation and efficiency. The benefits of AI could be considerable, as long as risks are carefully managed.”

A further key finding of the report is the strategic advantage that financial organisations can gain through aligning their technology and data strategies. In particular, the survey highlights the ongoing reliance on manual processes in risk management, with 24% of respondents using manual processing for control evaluation and monitoring, 22% for incident/loss event management, 21% for policy management and 21% for risk assessment. This reveals the potential for digitalisation to enhance efficiency and compliance, particularly in light of new regulations such as the UK’s emerging climate change rules and the global standard for sustainability reporting.

Looking further at the role of technology, financial organisations seem cautious about the use of generative AI, with 35% in the UK saying that they are already using it but have limited or no plans to further expand its implementation over the next 12 months.

The study also points to a shift in operational resilience, with 59% of organisations assigning significant budget to integrate operational resilience into their enterprise risk management frameworks. This reflects a proactive approach to risk management, moving from a reactive stance to an anticipatory one, acknowledging that disruption is not a matter of ‘if’ but ‘when’.

“This survey paints a picture of a financial services industry at a crossroads, with technology playing a pivotal role in navigating these changes,” said Gary Lynam, Managing Director EMEA at Protecht. “Firms are increasingly seeking to align risk management disciplines with technological advancements to build sustainable, resilient, and efficient operational frameworks. We urge organisations to embrace these technology-led changes to not only mitigate risks but also to harness new opportunities for growth and innovation.”

Sean Titley, Director of Enterprise and Operational Risk, Metro Bank, said: “An interesting and thought-provoking survey. Geopolitical risk is certainly a key emerging risk presenting many uncertainties and is on Metro Bank’s emerging risk register, as is AI, for which we are starting to explore the benefits as well as the risks. In line with the results, Metro Bank is continuing to enhance its robust approach to meeting operational resilience requirements and monitoring the risks related to our third parties, for which it is important to have a ‘joined up’ approach.”

Ben Lowing, Risk & Compliance Director at First Central Group, commented: “The Protecht survey provides a timely reminder to financial service organisations operating in a highly regulated environment of the scale, complexity and interconnectedness of the macroeconomic environment and the associated critical risk factors.

 Key findings:

  • Geopolitical Uncertainty: 26% of respondents identified geopolitical uncertainty as the top critical risk. Liquidity/Access to Capital: Nearly a quarter of the organisations surveyed (24%) highlighted liquidity and access to capital as a critical risk.
  • Usage of Manual Processes in ERM: The survey found there is ongoing and considerable reliance on manual processes in key areas of Enterprise Risk Management (ERM).
  • Generative AI Adoption: While 35% of UK financial organisations are using generative AI, they express limited or no plans for further expansion across the organisation in the next 12 months. Many in the risk domain have chosen to adopt a watching brief in 2024 whilst regulations evolve, and the capabilities become better understood.
  • Operational Resilience Budget Allocation: More than half of the respondents (59%) have allocated a significant portion of their budget to integrating operational resilience within their ERM frameworks, suggesting a move to Phase 2 and need for digitisation of this exercise.
  • Investment in Third-Party Risk Management: A significant majority of UK financial organisations surveyed (68%) plan to substantially increase investment in Third Party Risk Management (TPRM) solutions over the next 12 months as the burden of volume and shift in regulatory expectations drives additional rigour.

 

 

 

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