Navigating FINRA’s 2026 Digital Risk Priorities

The pace of digital transformation across the financial sector continues to accelerate, reshaping how institutions operate, engage clients, and manage risk. FINRA’s 2026 Annual Regulatory Oversight Report highlights a set of priorities that signal where risk expectations are shifting across the industry. After reviewing the report, we’ve identified key areas where financial institutions should focus their attention and how they can strengthen their digital risk posture, reinforce operational resilience, and prepare for deeper regulatory scrutiny.

We move beyond FINRA’s guidance and focus on the digital risk priorities that warrant attention now. We outline recommendations that support readiness, effective governance, and the capability to manage emerging technology driven risks with confidence.

• Generative AI Governance: FINRA urges firms to establish robust governance for GenAI and AI agents, including controls and testing, for accuracy, bias, and accountability. Human oversight remains critical to prevent audit gaps and compliance failures.
• Cybersecurity and Fraud Resilience: The threat landscape is expanding, with new attack vectors such as “quishing” (QR code attacks) and deepfake enabled fraud. FINRA expects stronger incident response, threat intelligence, and proactive controls, noting that GenAI is now used by both defenders and attackers.
• Third-Party and Supply Chain Risk: Vendor sprawl and embedded AI in managed services create new accountability challenges. Enhanced oversight of outsourcing, cloud resilience, and third-party risk management are recommended. It’s also important to extend oversight beyond direct vendors by incorporating forth-party risk management, monitoring and assessing the risks associated with the vendors used by your third-party suppliers. By requiring third parties to disclose and manage their own supplier risks, financial institutions can strengthen the overall resilience of their supply chain and ensure accountability throughout the extended vendor ecosystem.

Moving Firms Up the Digital Risk Maturity Curve

• From Compliance to Advantage: Strong controls and transparent reporting build trust and support innovation. Treating compliance as a strategic capability helps firms align risk management with growth objectives.

• AI Risk Management: To effectively manage AI-related risks, organizations must implement advanced measures that go far beyond basic governance. This involves several key components:

• • Kill-Switch Protocols: Establish robust, automated mechanisms—often referred to as "kill-switches"—that can immediately halt AI system operations in the event of unexpected, unsafe, or non-compliant behavior. These protocols ensure that organizations retain control over AI processes, allowing for rapid intervention to prevent potential harm, regulatory violations, or reputational damage.
  • Reward Structure Audits: Conduct regular audits of AI model incentive systems to detect and address risks of unintended or unethical outcomes. This ensures AI actions remain aligned with organizational values and compliance requirements.
  • Privacy-Preserving Telemetry: Use of privacy-enhancing technologies to monitor AI operations while protecting sensitive data. This enables ongoing oversight, anomaly detection, and incident response, ensuring compliance with regulations like GDPR and CCPA, and maintaining both transparency and data protection.

By integrating these advanced controls into AI operations, financial institutions can move from reactive risk management toward a proactive, resilient posture. This not only addresses regulatory expectations but also builds trust with clients and stakeholders, positioning the organization as a leader in responsible AI adoption.

• Cyber Resilience: In an era where financial institutions face increasingly sophisticated cyber threats, reinforcing the organization’s defenses is paramount. The following are examples of key strategies that can empower firms to proactively safeguard their assets and maintain operational integrity in a rapidly changing risk landscape.

• Strengthening cyber resilience means adopting zero-trust architectures that require strict verification for all users and devices, greatly reducing the risk of unauthorized access.
• AI-driven anomaly detection helps organizations quickly spot and respond to unusual activity, using advanced analytics to identify threats that traditional tools might miss.
• Integrated incident response ensures coordinated, rapid reactions to cyber incidents, minimizing disruption and continuously refining defenses.

Together, these steps help financial institutions stay ahead of evolving cyber threats and maintain trust and compliance in a dynamic environment.

• Third & Forth-Party Oversight: To ensure comprehensive risk management in AI operations, organizations should strengthen oversight of external vendors and service providers. Begin by creating a detailed “vendor bill of materials” for AI projects, cataloging all third-party components, data sources, and software integrated into your systems. This transparency enables better risk assessment and accountability for every external element.

• Enforce strict contractual obligations that mandate regular security assessments and compliance checks, ensuring vendors adhere to your organization’s standards and regulatory requirements.
• Integrate privacy-enhancing technologies into your vendor management processes, such as data minimization, encryption, and anonymization tools. By embedding these measures, organizations can safeguard sensitive information handled by third parties, reduce exposure to privacy risks, and maintain compliance with frameworks like GDPR and CCPA.

Taken together, these steps help financial institutions maintain rigorous control over their AI ecosystem, mitigate risks associated with third-party dependencies, and reinforce trust with clients and regulators.

• Culture and Training: Invest in targeted education and behavioral frameworks to embed privacy and compliance awareness throughout the organization.

Charting a Path Forward: Building Digital Resilience

FINRA’s outlined priorities call for a shift from reactive compliance to proactive risk management, emphasizing robust governance and the adoption of a unified digital risk framework. This approach not only anticipates emerging threats but also ensures that risk mitigation strategies are woven into the fabric of daily operations. By fostering a culture of vigilance and accountability, financial institutions can better safeguard their assets while maintaining regulatory compliance and client trust.

Digital risk has evolved into a pervasive challenge, impacting every facet of the financial sector. Organizations now stand at a crossroads, they can choose to elevate digital risk management from isolated efforts to a core strategic capability, seamlessly integrating governance, resilience, and culture across their operations.

The opportunity for transformation is significant. With the right guidance and expertise, firms can navigate this complex landscape and unlock the full value of effective digital risk management. By taking a holistic approach, financial institutions can build secure, resilient, and forward-thinking organizations that are equipped to thrive amid uncertainty, earn the trust of clients and regulators, and lead the way in AI-driven innovation. Together, let us move confidently into 2026 and beyond, shaping a future defined by resiliency, security, adaptability, and sustained excellence.

If you’re interested in assessing your firm’s digital risk maturity, we offer a structured benchmarking approach that highlights strengths, gaps, and practical pathways to improvement. To learn more, please contact Lisa Toth at lisa.toth@baringa.com.