BusinessRiskTV Financial Services Risks Forum
Risk in financial services industry in UK are varied complex and interrelated. Political economic social technological legal and environmental risks all play a part in the success or otherwise of a financial services business in the UK.
How an organisation responds to existing and emerging financial services risks will define its future business resilience and sustainability. Survival is not a given never mind success!
Recent surveys have found that people in the UK are on average not investing for their future. Business investors are concerned about the threats rather than the opportunities from Brexit.
In the UK consumers are borrowing more and continue to spend spend spend! High levels of employment and the low unemployment rate creates a level of sustainability that belies the fears of the professional investors.
Key Types of Financial Services Risks include :
- Regulatory pressures because the cost of compliance has risen and the cost of non-compliance can be severe
- Low interest rates because they reduce the income potential from many financial products or businesses
- Brexit because of the loss of Passporting may have an impact on income from European Union but there is significant uncertainty on the severity of the impact.
- Skills Gap despite worries of job losses due to Brexit there is actually a shortage of skilled workers in the financial services industry. The costs of employing people in the City of London are increasing as a result of the developing skills gap.
FinTech creates more opportunities to improve the profitability of financial service provision and allow more entrants to the marketplace to compete with traditional financial services providers.
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— Risk Management (@HolisticRiskMgt) September 14, 2018
17th October 2018 Insurance Company Regulatory Control News
The Bank of England BoE has reportedly allowed UK insurers more flexibility on how they value assets in volatile markets.
The BoEs Prudential Regulation Authority PRA said it would make it easier for insurers to use the dynamic volatility adjustment risk assessment tool that is part of the European Unions capital requirements for the sector.
The PRA said says its new guidance is not an excuse for insurers for cutting capital requirements.
The Association of British Insurers ABI said the change brought Britain into line with what other national regulators and the EUs insurance watchdog EIOPA already permitted.
4th September 2018 Reinsurance Rates Relatively Stable Throughout 2019
- According to credit rating agencies S&P Global Fitch and Moody’s reinsurance premiums should hold steady due to competition in the insurance marketplace
Reinsurers like Swiss Re Munich Re and Lloyds of London increase the capacity to insure risks in the UK and around the world. They make business life less uncertain and risks become more acceptable more managable.
Credit rating agencies think that reinsurance premiums next year will rise less than 5 percent. It is a buyers market and reinsurers in 2018 have to fight for their portion on the insurance marketplace. This will continue in 2019.
Outlook for UK financial services brightens, assets set to reach £1.5 trillion by 2020, EY finds #FinancialServices #FinancialSector #FinancialIndustry #UKEconomy #UKbusiness #UKnews #UKreport https://t.co/EMvWHvbDQo
— Risk Management (@HolisticRiskMgt) March 12, 2018
11th December 2017 Shortage of Applicants For City Jobs
Recruitment firm Morgan McKinley has reported problems for London city financial services companies trying to fill skills gaps in the Square Mile in London. Employers are increasing starting salaries to try to attract new recruits.
Skills gaps in the Square Mile has meant a jump in City job wages of more than 15% according to Morgan McKinley. New regulations has meant that employers can’t wait to fill skills gap in the City.
30th September 2017 UK Managing To Save Despite Increasing Debt
The Office for National Statistics ONS reports that in the 3-months to June 2017 UK savers saved 5.4% of income. This is an increase on the first quarter where it was only 3.8% and this at a time when consumers are borrowing more to spend. It is an indication that the UK economy is healthier than many commentators promote for their own political reasons.
9th August 2017 Legal & General Gets Boost From Poorer Than Anticipated Life Expectancy Figures
Legal & General expected longer living to result in longer pension payments, but people aren’t living as long as thought. Unhealthy lifestyles in the UK are to blame.
Legal & General pre-tax profit jumped 41% to £1.2 billion in six months to June 30th with the retirement business unit performing better than expected.
Legal & General Chief Executive, Mr Wilson, has scanned the horizon and doesn’t see any significant risks to the company. He thinks businesses in the UK are performing well after the Brexit vote and will invest more in UK business start ups.
— Risk Management (@HolisticRiskMgt) May 30, 2017
— Online Manager (@RetirementMag) May 24, 2017
17th February 2017 – UK Pensions and Lifetime Savings Association (PLSA) Wants Rein-In Executive Pay
The PLSA has called for new rules to ensure executives obtain proper shareholder approval for executive reward packages. It also advocates the release of corporate data presenting the pay ratios between the CEO and his or her workforce.
The PLSA is the leading body in the UK for providing representation and other services to those involved in designing, operating, advising and investing in all aspects of workplace pensions. It represents 1,300 pension fund members that provide pensions for over 17 million people and have more than £900 billion of assets under management. The Association membership also includes 400 businesses that provide services to pension funds including investment managers, law firms, actuarial consultancies and administrators. It aims to spread best practice among its members.
18th January 2017 – Financial Services Firms Exploring Brexit Options In Ireland
The Irish government has received more than 100 inquiries from UK financial firms considering operations in Ireland. They are exploring viability of moving operations, or perhaps opening additional operations in Dublin, to provide flexibility to manage risks from Brexit. They may want to set operations in Ireland but that may not mean also closing down operations in the City Of London, though some could.
13th January 2017 – UK Savers Increased Protection Of Cash
Savers will at the end of January, get protection for £85,000 cash up from £75,000, with each financial institution they place cash in. If the financial institution goes bust the Financial Services Compensation Scheme (FSCS) will reimburse customers up to £85,000.
Emerging financial services threats and opportunities arise from FinTech developments, compliance with regulations and a revisit to the mantra of being fair to the customer.
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Management of risk in financial services
Are you responsible for managing risks in your financial services business?
Poor risk management in financial institutions is self evident. Very few financial services businesses would not have had risk management systems in place prior to financial crisis in 2007-08. However, enterprise risk management (ERM) is but a tool. The ERM tool is only as effective as the person or business employing it in practice.
2008 was not the last time ERM failed. The UK’s biggest financial services institutions are still making mistakes that can only arise through the inadequate use of ERM principles and practices. And the result is continued loss of shareholder value, loss-making financial services businesses, loss of jobs in financial services industry and customers who have suffered financially fatal losses.
Business risk in financial services industry is the driver of success or failure. Use an enterprise risk management (ERM) framework to bring about risk culture change and improve corporate governance and regulatory compliance
Our financial services business risk partners can assist you in achieving your strategic operational and project objectives whilst cost-effectively and pro-actively managing your enterprise-wide risk. Financial services risk management combines action on corporate governance, enterprise risk management and regulatory compliance (GRC).
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