Connected Perspectives: Better Decisions on Digitalization for Financial Institutions

Connected Perspectives: Better Decisions on Digitalization for Financial Institutions
October 15, 2024 5 mins

Connected Perspectives: Better Decisions on Digitalization for Financial Institutions

Connected Perspectives: Better Decisions on Digitalization for Financial Institutions

As financial institutions reshape human capital strategies for the digital age, leaders face pressure to balance the risks and opportunities of digitalization.

Key Takeaways
  1. Cyber attack or data breach is the number one risk for financial institutions.
  2. Building cyber risk maturity while balancing cost optimization is a growing challenge for leaders as they seek to embrace new frameworks and strategies to manage and mitigate evolving risks.
  3. As talent needs shift towards enhanced wellbeing, employee experience and workforce resilience, leaders can no longer rely on simply buying talent.

The increasingly complex and interconnected nature of digitalization calls for a new approach to risk capital and human capital management in financial institutions. Technological advances continue to transform operational structures and rapidly reshape long-established commercial models. However, the people pressures of digitalization are equally relevant.

Shifting workforce demands have increased the pressure on leaders to balance cyber and talent needs, establishing an organizational culture that enables people to thrive in an increasingly digitalized world of work.

Digitalization Heightens Risk Exposures

Digitalization presents significant exposures across industries, and by 2027, the global cost of cybercrime is set to triple.1 The increasing potential of capital exposures faced by financial institutions has resulted in cyber attack or data breach being ranked as the sector’s primary risk.

While the implementation of artificial intelligence (AI) has enormous potential to increase efficiencies and processes in financial institutions, risk management must keep up with the rapid development and deployment of AI technologies. The reputational and security risks are all too apparent for leaders, with 75 percent of CROs agreeing that the use of AI technologies poses reputational risks to their organizations.2

Digtialization Aligning with Asset Valuation and Regulation

The digital age has propelled intellectual property (IP) to the forefront of asset valuation, with intangible assets comprising 90 percent of the value of the S&P 500.3 Assessing and quantifying the value of IP can not only help organizations manage risk but can also be used to attract and leverage new sources of growth capital for businesses.

Newly acquired entities may have disparate security protocols, creating vulnerabilities that hackers can exploit. However, when financial institutions implement solid security measures, they can benefit from skills, capabilities and operations that will help the larger entity remain competitive.

Compliance with cyber regulation, such as the Digital Operational Resilience Act (DORA) in the EU, will help to strengthen and streamline operational resilience internally and across supply chains by 2025. Organizations that integrate DORA sooner will have more time to mitigate risks and maintain customer trust.

#1

Cyber attacks or data breaches remain the top risk for financial institutions in Aon’s most recent Global Risk Management Survey.

Source: Top Risks Facing Financial Institutions, Aon, 2023

Learn More
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To find the balance between agility, innovation and workforce resilience, financial institutions need to develop a continuous improvement mindset — leveraging the knowledge from controlled experimentation to help them meet tomorrow’s challenges.

Pete Rutherford
Global Financial Institutions Industry Leader, Enterprise Client Group, Aon

Digitalization Reshaping the Employee Landscape

New ways of working and technology are driving change: more than a quarter of banking jobs are estimated to be at risk from developments in AI and automated processes.4 As demand for technical skills increases across the whole economy, specialists, such as developers and data scientists, are in high demand and short supply, igniting a fierce battle for talent.

Technology not only reshapes the structure of organizations but also shifts the profile of skills needed. As hybrid working leans on technology to support new ways of working, leaders must recognize employees' work experiences. Fostering wellbeing and work-life balance helps attract critical talent and promotes an environment of support and resilience.

By connecting and aligning financial and operational risks, businesses in the FI sector can develop more robust enterprise risk strategies that help build resilience in the face of uncertainty.

Businesses can better drive technology transformation and navigate potential digital disruption when they reimagine their people risk strategies, taking a holistic and collaborative approach to building workforce skills, agility and resilience.

Discover more about managing and mitigating interconnected risks with Aon’s: Better Decisions on Risk Capital and Human Capital for Financial Institutions report.

Aon’s Thought Leader
  • Pete Rutherford
    Global Financial Institutions Industry Leader, Enterprise Client Group, Aon

1 Cybercrime Expected To Skyrocket in Coming Years, Statista, 2022
2 Macroeconomic and Geopolitical Conditions Pose Severe Risks to Organizations, say Chief Risk Officers World Economic Forum, 2023
3 Intangible Asset Market Value Study Ocean Tomo, 2022
4 Automation is putting 27% of banking jobs at risk Aon, LinkedIn, 2023

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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