Financial Risk Managers Expect Regulatory Complexity, Volume and Cost to Increase over the Next Three Years

NEW YORK, Feb. 27, 2015 /PRNewswire-USNewswire/ -- Of senior risk professionals attending the Global Association of Risk Professionals (GARP) 16^th Annual Risk Management Convention this week, 64% said that regulatory volume and complexity would continue to increase over the next three years. What's more, according to polling conducted during the convention, 85% felt that the cost of regulation would increase over the same time period.

The convention, hosted in New York, is the world's largest gathering of risk professionals from the financial services and energy industries, and attracted attendees from 45 countries. The two-day program, covering a broad range of risk and compliance topics including cybersecurity, big data, culture and governance, stress testing and model risk, was interspersed with polling, which provided the audience an opportunity to provide their views on various risk-related questions.

"The results underscore what we are hearing from the industry and our members", GARP President and CEO Richard Apostolik said. "The Dodd-Frank Act, leverage ratio minimums from regulators, and liquidity coverage ratio are all high-ranking concerns for those in banking.  However it's the aggregate of these that pose the greatest challenge for the industry. These results, though fairly fundamental in a snapshot poll, do highlight the need for ongoing, non-partisan dialogue among regulators, senior practitioners and academics. There are significant trust issues to be addressed – a general sense that there is still considerable work to be done for the industry to win back the trust of the regulators before we can expect less intrusive regulation."

Other results from the convention polling included:

• When asked what risk to their company they were most concerned about, more than a third of respondents (35%) pointed to an inability to effectively assess risk across the entire company due to its size and complexity
• When it came to macro-economic risk, the audience, principally from North America (78%), was most concerned about poor economic performance from the U.S. leading a worldwide slowdown.
• With recent data breaches taking the headlines, cybersecurity was a key topic on the agenda. Most of those polled (59%) indicated that the level of collaboration between risk and IT in their organizations rested principally in reporting, with cybersecurity risks getting rolled up with other risks in board and other reports. This left significant room for improvement in collaboration, with less than a quarter (24%) feeling it was a true partnership.

About GARP

The Global Association of Risk Professionals (GARP) www.garp.org  is a not-for-profit global membership organization dedicated to preparing professionals and organizations to make better informed risk decisions. The GARP risk community represents over 150,000 risk management practitioners and researchers from banks, investment management firms, government agencies, academic institutions, and corporations from more than 195 countries.

GARP's mission is to educate, train and set global standards in financial and energy risk management, and administers the Financial Risk Manager (FRM®) and Energy Risk Professional (ERP®) exams; certifications recognized and valued by risk professionals worldwide. GARP also helps advance the role of risk management via comprehensive professional education and training for professionals of all levels.

Risk taking is an integral part of business, and is a catalyst for growth. Developing a robust risk culture has many benefits, chief among them, empowering a company to pursue the opportunities that should ultimately enhance stakeholder value, while avoiding unwarranted risks or even catastrophic outcomes.

Note to editor:
Results reflected responses from those attendees at the 16^th Annual GARP Risk Management Convention who elected to participate in the polling sessions. Results are expected to be interpreted as a snapshot of the responses of senior risk professionals to the questions posed in a real-time polls.

Has regulatory change hit the high tide mark?
We've hit high tide, and we can expect a similar level of volume and complexity in the next 3 years as we do today (27%)
The tide is still coming in, and we can expect continuing growth in the volume and complexity of regulation over the next 3 years (64%)
The tide is going out, and we can expect decline and a simplification of regulation over the next 3 years (9%)
(N=217)

Will the cost of regulation
Stay the same in the next 3 years (11%)
Grow over the next 3 years (85%)
Decline over the next 3 years (4%)
(N=262)

What risk to your company are you most concerned about?
Data breach (15%)
Model governance (7%)
Inability to effectively assess risk across the entire company due to its size and complexity (35%)   
Senior management's failure to fully understand the risks faced by my company (22%)
Inability to deal with the volume of new regulation globally (21%)           
(N=362)

Which macro- economic risk are you most concerned about?
China 'hard landing' economic scenario (14%)
More countries absorbed into Middle East conflicts (11%)
A new 'cold war' arising from Ukraine/Russia tensions (11%)
Oil prices (17%)
Poor economic performance from US leading world slow down (31%)
Greece tensions triggering a breakup of the Eurozone (14%)
N= 368

Which banking regulatory initiative are you most concerned about?
Dodd-Frank Act (42%)
MIFID II and EMIR regulation in Europe (4%)
Global Margin requirements on derivatives (12%)
Leverage ratio minimums from regulators (18%)
Net Stable Funding Ratio (6%)
Liquidity Coverage Ratio (18%)
N=342

CONTACT: Kimberley Allan, 201.719.7255, [email protected]

Photo - http://photos.prnewswire.com/prnh/20150227/178501

SOURCE The Global Association of Risk Professionals (GARP)

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