Deliberately guard against overconfidence by raising risk and compliance investment and voice.
Regulators view “risk complacency” by financial service companies as a potential threat to both stakeholder trust and safety and soundness. Companies must deliberately ensure that they are guarding against overconfidence—particularly during times of business, M&A, and innovative growth—by raising risk and compliance investment and voice.
Over-confidence leading to complacency is a risk—when prudent risk management is set aside in pursuit of profit.
Acting Comptroller of the Currency, August 2021
Prudent risk and compliance management (commensurate with size, complexity, and risk profile) must accompany business change and growth, as well as anticipate and address expanded regulatory risk expectations.
In the areas of human capital and risk culture and commitment, heightened regulatory attention will include:
Financial service companies must continuously determine how best to utilize data and technology to meet consumer and client demands – both from a business and a risk perspective. Regulators expect companies to take a data-driven approach to risk and compliance monitoring and assessment. Likewise, regulators increasingly utilize data-driven supervision and enforcement.
Areas of regulatory attention will include:
Financial service companies must incorporate emerging risks and regulatory expectations, but also continue to demonstrate timely identification and remediation of issues.
Regulatory attention will expand in areas such as:
Regulators will expect that risk and control functions are part of continued business, operational and technology change. The sense that “it cannot happen here”, “the third party owns that risk”, or “that’s the way we have always done it” is unlikely to be a strong or sufficient risk stance and will be increasingly pressured by regulatory supervision and enforcement.
Key areas of focus for robust risk governance and controls will include:
Ten key regulatory challenges of 2021
The future of regulatory: Altering our view
Washington Report 360
A weekly newsletter covering legislative and regulatory developments affecting financial services firms—in 360 words or less.