Future of risk in banking

As New Zealand banks navigate heightened regulatory scrutiny, accelerating digitalisation and increasingly complex non‑financial risks, effective risk management has never been more critical. This report explores how leading banks globally are transforming their risk functions to respond to economic volatility, emerging technologies, cyber threats, ESG expectations and growing supervisory demands.

For New Zealand banks, the insights are particularly relevant. The report highlights the need for stronger enterprise‑wide risk integration, forward‑looking risk identification, and improved data and infrastructure — all key focus areas for banks operating under the evolving expectations of local regulators and increasing demands on competition and transformation within the sector

The report shows how risk leaders can move beyond compliance to build resilient, data‑driven and digitally enabled risk functions that support strategic decision‑making, operational resilience and sustainable growth in the New Zealand market.

Key drivers of the evolving risk landscape

Several factors are reshaping risk management in banking:

Emerging risks

Several interconnected factors are reshaping banks’ risk functions, including global fragmentation into trading blocs, geopolitical conflicts, and emerging technologies that present both risks and opportunities. KPMG's research highlights economic volatility and geopolitical complexity as the top challenges for banks.
Managing digital operations and digitalization

Digitalisation is transforming banking services and controls, offering significant potential benefits but also exposing institutions to evolving risks like fraud, consumer protection issues, and system disruptions. To stay competitive, banks must balance innovation with effective risk management.
Meeting evolving regulations

Banks face diverse regulatory challenges, including compliance and ESG requirements, which vary by region and complicate adherence. KPMG's research identifies adapting to these evolving regulations as a key to transforming risk management, with compliance as a top strategy. While achieving compliance requires significant investment, AI and digital tools can lower costs. Banks' expertise in regulation gives them an advantage over fintechs.

A roadmap to the future of risk management

Risk identification

Banks must implement mechanisms for rapid identification of emerging risks, assess their interdependencies, and use proactive, scenario-driven evaluations to address disruptive events effectively and safeguard operations.

Risk measurement

Dynamic risk assessment frameworks must combine qualitative and quantitative methods, implement cross-risk stress testing, and leverage integrated simulation tools for enterprise-wide evaluation of threats and opportunities.

Risk monitoring, control, and reporting

Advanced monitoring requires enterprise-wide collaboration, AI-driven solutions for efficiencies, and enhanced reporting systems that focus on actionable insights and alignment with regulatory demands.

Data and infrastructure

Effective risk management hinges on clean, integrated data from modernised systems, addressing legacy fragmentation and allowing scalable technologies like AI to unlock valuable insights critical for resilience and compliance.

Transform risk into opportunity

For risk leaders ready to embrace the future, this paper delivers some of the knowledge and tools necessary to help navigate today’s complex challenges. Explore how to turn risk into an opportunity for value creation and align your organisation with the demands of the modern risk environment.