Elevating risk management beyond the 2nd line

As the risk management function matures, firms are looking to evolve beyond a focus on high-profile risk mitigation towards a more cost-efficient and strategic business function. This transformation comes as many banks are incorporating artificial intelligence into their 1st line of defence operations to increase efficiencies and to reduce opportunities for misconduct to affect bank activities. As these authors from Grant Thornton discuss in this article on the Risk Management website, bank leaders are increasingly looking to the risk management function to take on a more strategic role.

There are a number of forces driving this trend. First, banks are realizing that effective risk management must be tightly integrated into business strategy and receive strong support from leadership. Second, management is looking to streamline costs even as they also feel pressure to justify the effectiveness of that spend. Finally the scope of risk management is expanding as it must accommodate new innovations being introduced in the largely unregulated fintech sector. Going forward, risk management will not be viewed as merely a “second-line activity”, but will be viewed as having a prominent role in improving business performance.