Risk Management Critical to Growth for North American Banks

2015 Global Risk Management Study
Industry: North America Banking

Key findings
2Copyright © 2015 Accenture All rights reserved.

Source: Accenture 2015 Global Risk Management Study - North American Banking respondents. Access at: http://www.accenture.com/riskstudy2015
34%
of NA bank
respondents are open
to greater digital risk –
less than the global
average.
62%
expect cyber
risk to
increase. 44%
of NA bank respondents
believe risk is already
a significant facilitator of
long-term profitable
growth (28% for all
surveyed banks**).
66%
think risk will be critical
or important to
innovation and
product development.
Key challenges
North American (NA) banking respondents to the Accenture 2015 Global Risk Management Study* face 3 key challenges:
1
Regulatory fall-out of systemic collapse
2
Tough economic headwinds
3
New entrants from technology sector
30%
of NA bank
respondents see very
frequent interaction
between the CRO and
board.
12%
think risk
function
interacts very
frequently with
the CIO.
62%
of surveyed NA
banks think cyber
and IT risks will
become more severe.
78%
say emerging
digital risks are
taking up more and
more of the CRO’s
time and energy.
30%
of NA banks surveyed
make extensive use of
analytics to manage
credit risks.
26%
use analytics
extensively
for operational risks. 26%
of NA banks surveyed
have extensive digital
technology knowledge. 42%
have recruited
data analysts and
scientists (49% for
all surveyed banks**).
Risk management supporting growthApproach to digital
Risk’s influence remains limited in places Emerging operational risks
Underutilized analytics Digital talent
For more information, please visit: http://www.accenture.com/riskstudy2015
*Accenture 2015 Global Risk Management Study – North American Banking respondents
**Accenture 2015 Global Risk Management Study – Banking respondents
Risk management in North American banking
© 2015 Accenture. All rights reserved.
3

61%
of risk masters
believe their risk
function can play
a critical role in enabling
profitable growth.
54%
of risk masters
believe they can help
establish this growth
“to a great extent”.
35%
of non-masters
report the same
view.
Around 1 in 10 respondents to the
Accenture 2015 Global Risk
Management Study are “risk masters”.
10%
61%
of risk masters agree
strongly that emerging
risks, such as cyber and
digital, are consuming a
greater proportion of the
CRO’s time.
35%
of non-risk
masters feel
strongly
about this.
61%
of risk masters agree
strongly that they
employ dedicated
technology specialists
to help manage digital
risk.
27%
of non-masters feel
the same.
Stronger focus on profitable growth
Stronger focus on emerging risks Growing digital experience
For more information, please visit: http://www.accenture.com/riskstudy2015
Source: Accenture 2015 Global Risk Management Study – all respondents
What makes a risk master?
Better handle on regulatory and compliance
More extensive use of analytics
37%
of risk masters
believe strongly that
regulatory change is
receding in relation to
other requirements.
25%
of non-risk
masters see
regulatory
change receding
in the same way.
36%
of non-masters
feel the same.
More risk masters make extensive use of analytics to manage key risk categories
including fraud and financial crime, cyber and IT risk, and credit, market and
regulatory risks.
Risk masters are also more likely to be investing heavily in digital technologies.
4© 2015 Accenture. All rights reserved.

Contents

Contents
A Our methodology
B Paths to prosperity:
Choose risk and return
C An evolving landscape

Our methodology

Introduction
4th iteration of our Global Risk Management
Study (2009, 2011, 2013)
2015 Global Risk Management Study:
Paths to Prosperity
For the 2015 study, we surveyed 470 CFOs,
CROs, CEOs, CCOs and CDOs involved in
their organization’s risk decisions
Respondents came from North America,
Europe and the Asia Pacific regions
Survey focused on three industry sectors:
Banking, Insurance and Capital Markets
This sector report presents the insights and
perspectives of 50 North American
respondents

2015: Choose Risk and Return
Risk management plays a critical role in
innovation and product development
and is a significant supporter of long-
term profitable growth.
A collaborative partner, risk
management is a key partner in
facilitating digital transformation.
Source: Accenture 2015 Global Risk Management Study – North American Banking respondents. Access at: http://www.accenture.com/riskstudy2015

Study demographics
We surveyed 470 C-suite officers across all geographies and 12 countries
Country Geography Regional target Respondents
Australia
Asia
Pacific
150
30
China 30
Hong Kong 30
Japan 30
Singapore 30
UK
Europe 170
50
Germany 30
France 30
Spain 30
Italy 30
USA North
America
150
100
Canada 50
Total 470 470
Company size Total
Between US$1bn and US$5bn 235
Revenues over US$5bn 235
Total 470
Respondent Total
Chief Risk Officer 141
Chief Executive Officer 78
Chief Financial Officer 147
Chief Compliance Officer 28
Chief Operations Officer 31
Chief Data Officer/CIO 45
Total 470
Sectors Sector count Asia Pacific Europe North America
Banking 150 50 50 50
Capital Markets 170 50 70 50
Insurance 150 50 50 50
Total 470 150 170 150

Paths to prosperity:
Choose risk and return

12
Seeking profitable growth in a challenging environment
Copyright © 2015 Accenture All rights reserved.
Looking for a roadmap through the backdrop of a cloudy outlook
Current Challenges
• US banking sector yield disappointing
results, despite recovering US
economy and stronger balance
sheets
• Current environment includes
regulatory fines, low interest rates,
rising costs in risk and compliance
operations, and capital constraints
due to regulatory requirements
• Canadian banks are rated soundest
in the world, yet face a threats from
benign economic conditions such as
low commodity prices and the
potential for higher interest rates
Future Issues
Banks are encouraged to:
• Explore new ways to increase
efficiency and productivity to support
sustainable and profitable growth
• Embrace innovation, especially with
regard to new digital technologies as
well as digitally-enabled business
models
• Reposition risk management to play a
proactive role in generating efficiency
and growth, instead of just firefighting
macro economic contingencies

13
Risk appetite returning in a targeted way
Figure 1: Senior Management’s appetite for risk
Actions to Consider
• Position risk management as a strategic
partner to help answer “how” not “yes/no”
• Seize the relatively narrow window of
opportunity to develop digital offerings, or risk
losing to non-traditional competitors
• Encouraged to up the pace of innovation in
digitally-enabled products and services
Key Findings and Challenges
• North American (NA) banks, active in seeking
new growth opportunities, but at a slow pace
• Comparatively, NA banks have slightly stronger
appetite for new product development, M&A,
and business model change
• Surprisingly, NA banks have a smaller appetite
for digital initiatives and geographic expansion

14
Digital, a key channel to help drive growth for NA banks
Looking for a roadmap through the backdrop of a cloudy outlook, digital could offer benefits on
both sides of the profit equation
Digital for
Growth
• Guards against competition: Technology-powered, non-traditional banking
companies target disruption and disintermediation of traditional banking
business models (e.g., Lending Club Corp – a P2P lending platform)
• Focuses on the customer: Omni-channel approaches to banking with
highly responsive, seamless interaction across branch, online and mobile
• Becomes center of the digital ecosystem: Provides bridges to other online
services and serves as a digital hub
• Lowers cost to serve customers: Transaction costs in digital channel may
be less than in a physical branch
• Leverages regulatory resources: Manages staff costs assigned to
responding to regulatory requirements amid a tight market for risk talent
Digital for
Efficiency
• Competition is fierce, the pace of innovation is rapid
• Overwhelming percentage (72%) of 18-34 age segment say they will look
to non-banks to fulfill their banking needs*
Burning
Platform
* The Everyday Bank: A New Vision for the Digital Age,” Accenture, June 2014. Access at: http://www.accenture.com/us-en/Pages/insight-everyday-banknew-
vision-digital-age-banking.aspx

15
Digital transformation as the cornerstone of profitable growth
Figure 2: Rating the importance of the risk function as a means of achieving the following
• Compared to peers in other regions, NA banks’
risk functions are relied upon to help manage
liquidity/cash flow and support profitable growth
• Looked to help navigate volatile economic and
financial environments, while simultaneously
reducing the cost of capital
Actions to Consider
• Digital transformation could help reduce cost to
serve, with new products as well as migration
from costly agents to less expensive digital
channels
• Digital could help strengthen risk management
by providing data in near real-time to support
better decision making
%

16
Risk management as a key partner in facilitating digital
transformation
Figure 3: Interaction between the organization’s CRO and the following key executives
• Compared to peers in other regions, NA banks’
CROs have greater interaction with the Board,
CFO and CMO
• However, NA banks’ CROs lag in frequent
interactions with CCOs, business unit heads
and most notably, the technology organization
(CSO, CIO, CTO)
Actions to Consider
• Continue to articulate the value of risk to the
overall business and build closer relationships
with all C-suite executives
• Expand the current set of risk responsibilities to
help meet regulatory and operational demands
• Position risk function to help control risks
associated with growth plans
%

17
The shift to digital introduces new risks to operations
Figure 4: Expected change in severity of risks facing the business over the next two years
• Compared to peers in other regions, NA banks
are more concerned about the severity of
credit, strategic, regulatory and market risks
• Notably, cyber, liquidity and fraud risks do not
register as severe a concern among NA banks
• However, new exposures could come from
mobile and online channels and operations
Actions to Consider
• Assess the security of operations against the
backdrop of a quickly widening ecosystem
• Create a risk culture that is appropriate and
robust enough for mobile and online channel
operations support teams
• Rapidly develop procedures and policies to
help manage emerging operational risks

18
Analytics, a powerful tool to help enhance the customer
experience
Figure 5: Risk management’s use of data and analytics in addressing the following types of
risk.
• NA banks tend to use analytics in targeted
areas and functions, such as assessing
business risks, government fiscal crises, cyber
and IT risks, and strategic risks
• Compared to the rest of the world, NA banks
rely less on analytics to manage credit and
operational risks
Actions to Consider
• Use analytics with greater applicability in both
a forward looking view of risk
• Leverage analytics to enhance customer
offerings, such as more rapid decisions on loan
services
• Harness the power of analytics with
investments in big data, other digital tools
%

19
The transition to digital and the demand for new skills and
capabilities in the risk function
Figure 6: Types of skills the bank recruited in the past two years
• Compared to peers, recruitment has been
slower for many NA banks
• As a result, NA banks have recruited less key
skills in nearly every area – the exception
being Accountants
• This lag is expected to continue in the next two
years
Actions to Consider
• To keep pace with the innovation and growth of
global peers, NA banks should increase
investment in risk professionals
• Invest in training and recruit new risk
professionals to support digital innovation, and
increase the risk function’s involvement in
broader strategic discussions
%

20
Conclusion: At a crossroads
Rise to the
Digital
Challenge
• For innovation and growth
• For operational efficiency and resilience
For Canada For United States
• Leverage current resiliency and
strength of banking sector to
innovate
• Consumer trends are not
developing as rapidly as US
• Build on importance of banking
sector with US’s relative
economic strength to grow
• Expand products and services
to meet the requirements of
demanding consumers

An evolving landscape

2005 2015VS
Decisions informed by past events
Risk only outlook
Focused on credit, market and operational
risk
Narrow definition of operational risk
Clear demarcation between three lines of
defense
“Left brain” – quantitative; analytical approach
Prioritized control and prevention
Tactical attitude: centered on day-to-day risks
Spreadsheet-based management
Digital? What’s digital?
Looking forward, with “next day” thinking
Recognizing risk AND inherent opportunity
Aware of a growing range of emerging risks
More comprehensive definition of operational risk
Three lines of defense, with fluid interaction embedded in the
business
“Left AND right brain” – creative, innovative understanding
A balance of control, prevention, and enablement
Strategic awareness: focused on long-term business
challenges
Increasingly integrated data sources
Emphasis on digital risks and opportunities
The Risk Landscape
Risk management in 2025
Analytics now permeates decision
making
Companies are exploring robotics and
artificial intelligence to manage
transactional risks
Behavior prediction helps to effectively
inform risk management
Rise of the Chief Risk and Return
Officer
Risk management is the career path to
the C-suite
Single data source drives reporting and
analytics activities
For more information, please visit: www.accenture.com/riskstudy2015 © 2015 Accenture. All rights reserved.

To learn more about the study
and to obtain your copy of the
North American Banking Report
please go to:
http://www.accenture.com/bankin
g-north-america-riskstudy2015
Source: Accenture 2015 Global Risk Management Study – North American Banking respondents. Access at: http://www.accenture.com/riskstudy2015

2015 Global Risk Management Study
Industry: North America Banking
24
Disclaimer:
This presentation is intended for general informational purposes only and does not take into account the reader’s specific
circumstances, and may not reflect the most current developments. Accenture disclaims, to the fullest extent permitted by
applicable law, any and all liability for the accuracy and completeness of the information in this presentation and for any
acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax
advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals.
About Accenture
Accenture is a global management consulting, technology services and outsourcing company, with more than 323,000
people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across
all industries and business functions, and extensive research on the world’s most successful companies, Accenture
collaborates with clients to help them become high-performance businesses and governments. The company generated
net revenues of US$30.0 billion for the fiscal year ended Aug. 31, 2014. Its home page is www.accenture.com.
Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

Risk Management Critical to Growth for North American Banks

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