Cyber security and disruption by new technologies top the list of emerging risk concerns for financial institutions, according to a poll of senior risk executives and directors by Global Risk Institute.
Eighty-three per cent of those polled during a conference in Toronto said Canadian financial institutions are vulnerable to technological disruption.
Meanwhile, 84 per cent of those surveyed after a session on housing featuring Evan Siddal, chief executive of the Canada Mortgage and Housing Corporation, said they think the Canadian housing market is vulnerable to a price decline, the risk institute said Tuesday.
When asked about the biggest emerging risk facing financial institutions, half the executives questioned cited technology. Ten per cent or fewer cited asset bubbles, a slowdown in China, and regulatory risk – which weighed heavily after the financial crisis of 2008 — as their top emerging risk concern.
“They’re clearly telling us that cyber security, [and] technology disruption is a thing that’s on their mind the most,” said Richard Nesbitt, chief executive of the Global Risk Institute.
He said there is “considerable concern about vulnerability to cyber security — so hacking — because it’s such an uncontrollable risk.”
Equally concerning is the emergence of new players using technology to challenge financial institutions in their traditional business lines including payments and lending, said Nesbitt, former chief operating officer of Canadian Imperial Bank of Commerce.
Mobile payments technology from players such as Apple Inc. creates “a new competitive frontier” and some banks are eager to compete with innovations that also include peer-to-peer lending, said Tiff Macklem, chair of the Global Risk Institute. But, the former senior deputy governor of the Bank of Canada warned, joining in “brings new operational risks to banks.”
The challenge is to “delight the customer but make sure that all the information is highly secure.”
Macklem and Nesbitt said enterprise risk, such as the impact technology could have on a bank’s relationship with its customers, has displaced market and credit risks that were dominant concerns in the aftermath of the financial crisis. Those risks were also the focus of regulators as they tweaked demands on capital levels and liquidity.
More than 180 senior executives from Canadian financial institutions were polled by the Global Risk Institute, whose members include the government of Canada, the province of Ontario, and 29 financial institutions including banks, insurers and credit unions.
Nearly half of those surveyed at the invitation-only event identified themselves as senior risk professionals, while eight per cent said they were at the board or chief executive level. Eleven per cent identified themselves as regulators.