75% of banks to invest in risk technology transformation amid unyielding headwinds

• Banks face unprecedented risk challenges - from geopolitical shifts to AI-driven disruption. This report, based on insights from 300 global banks, explores the transformation of risk management, from rethinking risk models to integrating AI and data strategies. Building on 2021 findings, this SAS and Longitude report tracks progress over three years and provides key insights for accelerating change.

• Global survey of 300 risk executives by FT Longitude and SAS shows a dramatic increase in risk management IT infrastructure and solutions investment as banks face formidable macroeconomic strife

Having navigated the coronavirus pandemic’s disruption, the banking industry faces a new era of volatility and uncertainty. Soaring interest rate and liquidity risks have toppled eight banks since 2023 and credit risk looms large amidst geopolitical tensions and the squeeze of inflation.

To effectively confront the mounting challenges, a global risk management survey from FT Longitude and data and AI leader SAS has revealed that 75% of banks intend to increase investment in risk technology infrastructure (up from 51% in 2021), and 64% plan to augment spending on third-party software (vs. 43% in 2021).

The new benchmarking report, Transforming Risk Management, is based on insights shared by 300 senior banking risk management leaders in 25 countries, surveyed in October 2024. A follow up to a study published in 2021, this latest report shows a striking rise in banking leaders’ prioritisation of risk management innovation, underscoring the critical role of technology in helping banks overcome adversity and build resilience.

Featuring perspectives from risk officers at Capital One, Commerzbank, General Bank of Canada and Santander Portugal, the research found that investment in risk technology capabilities is growing significantly. In addition to the burgeoning investment in technology infrastructure and third-party software noted previously, 65% of banks plan to engage third-party consultancy and advisory services, up 15% since 2021.

Risk modelling is a foremost focus for banks as they contend with regulatory change and seek to automate risk processes, with two-thirds (67%) of banks planning to advance their risk modelling capabilities over the next two years (vs. 54% in 2021), while the percentage of execs who regard risk modelling as a competitive advantage has surged to 63%, from 47% in 2021.

The use of AI, including newer generative AI tech, remains mixed, despite the great promise and potential. Only a minority of banks report widespread use of AI for functions like risk management (40%), risk modelling (30%) and fraud detection (36%). Fewer still report using GenAI for these functions: risk management (17%), risk modelling (16%) and fraud detection (24%). A lack of skilled talent is the top barrier to fully adopting AI, cited by 50% of respondents across regions.

As banks face a veritable data explosion from multiple sources, effective data management and data governance frameworks have never been more essential. The executives surveyed see improved risk management (64%), improved customer experience (55%) and improved fraud detection (51%) as top benefits for consolidating customer data. Yet only 14% intend to significantly consolidate customer data, and fewer than half (44%) say the same for non-customer data. Of note, data consolidation plans vary considerably by AUM and region.

Banks of all sizes, and in all regions, continue to grapple with their asset liability management (ALM) systems and capabilities – and most plan to enhance them. Only about 1 in 5 risk execs surveyed report they are “very satisfied” with their ability to manage liquidity risk (22%) or with their ALM systems (20%). Roughly 8 in 10 report they are either implementing next-generation ALM solutions (38%) or making comprehensive enhancements to their ALM functionalities (41%).

Overwhelmingly, integrated balance sheet management (IBSM) is a high aspirational goal of surveyed executives; 77% plan to invest in IBSM that enables them to better assess the impact of interest rate risk and credit risk. American banks and large banks lead the way in ALM integration.

Stu Bradley, Senior Vice President of Risk, Fraud and Compliance Solutions at SAS, said:

“With risks impacting financial institutions more interconnected than ever before, firms need a singular, AI-powered platform that allows them to evaluate risks across the balance sheet and perform more holistic stress testing. Those that replace outdated systems and infrastructure with a more integrated, enterprise-wide approach will see benefits across functions and enable better, more strategic decision-making.”

SAS has published a data dashboard at SAS.com/risksurvey that allows users to explore the study’s findings by region, institution type and asset size. Go beyond the key takeaways and discover how banks are transforming risk management by downloading the collaborative research report at SAS.com/riskreport.