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WOLF & CO Insights Looking at Emerging and Continuing Risk Management Challenges in 2022

Looking at Emerging and Continuing Risk Management Challenges in 2022



Can we agree there is no need to list out the challenges of 2021 while also agreeing there are positive trends that will continue? My attention to pandemic news is waning and I hope that COVID-19 becomes a global demarcation event as we transition to the second quarter of the century. With that out of the way, here are my top five risk management trends that banking CEOs are identifying that require real work in the months and years ahead. How many are on your list and is their priority comparable to mine?

  1. Cyber Risk Management

No one will be surprised that cyber tops the list, but what is concerning is how the threat vectors keep changing to keep cyber in first place. This is also the number one threat that CEOs believe will keep them up at night in 2022, as discussed at a recent New Jersey Bankers Association CEO panel. On October 6, 2021, DHS Secretary Alejandro Mayorkas elaborated on the national security risks of ransomware attacks. Not only is the threat prolific, but ransomware as a service (RaaS) is now a documented business model, copying the term software as a service, and results in 45 million Google hits. Some estimate that $150 million was paid to criminals in 2021. Even if off by 20%, the amount is enormous.

On October 5, 2021, Elizabeth Warren cosponsored a bill intended to require a victim’s disclosure on ransoms paid. I’m concerned that this could result in penalizing victims instead of criminals.

  1. The End of the Pandemic

COVID-19 could become another chronic disease requiring therapeutics to prevent serious illness or death. Andrew Busch, a consultant, futurist, and keynote speaker at a recent Western Bankers conference described how the pandemic (alpha) will transform into an endemic (delta) and then into the flu (omicron). I couldn’t agree more.

  1. Strategic Fintech Risk

The media and trade press have painted fintech companies as both friend and foe to the banking industry. The pre-pandemic shifts towards digitizing everything to onboard, offboard, service, and deliver on relationships accelerated due to work-from-home employment programs. There is too much money being invested in disrupting traditional banking services for the fintech trend to subside. The lack of solid strategic fintech plans will have the same result as a lack of key executive succession plans – the sale of the franchise.

  1. Liquidity

Cares Acts 1-4 enabled the federal government to inject approximately $5.8 trillion in the economy through direct payments to consumers, extended unemployment, rent and mortgage relief, and other stimulus measures. The resulting inflationary pressures and an estimated 2021 annual inflation rate of 5.5-7%, depending on your data source, isn’t a surprise. What remains unknown and of greatest concern to CEOs and their teams is what happens after the excess liquidity works through the economy in 2022. CEOs and their teams have no experience managing an environment in which a stimulus that represents approximately 20% of the 2021 estimated GDP of $25 trillion will be unwound so fast. This recalls the definition of a soft landing from economic theory: It is the process of an economy shifting from growth, to slow-growth, to potentially flat as it approaches but avoids a recession. Let’s hope our executive branch’s attempts for a controlled slow down to inflation is not upended by political posturing as midterm political campaigns begin to grab Main Street voter attention.

  1. Talent Management

The war for talent is not likely to ebb in 2022. Risk professionals, already in high demand before the pandemic, continue to be in short supply. A cottage industry of virtual risk services – information security, continuity planning, privacy, and enterprise risk – was forming pre-pandemic and is likely to grow. Fintech, regtech, and cryptocurrency firms are recruiting this highly technical, well-trained, and already highly compensated group away from traditional financial firms. If you can recruit this talent, meet their increasing salary demands, and retain them for the 4+ years required to earn back the recruiting and onboarding investment, you will be a 1 percenter. The rest of us will be managing short tours of duty or strategic consultants.