Steering your risk management in the right direction

Mark Crowhurst: Our world is an uncertain place, where risks lie around every turn. How can financial services maintain their pace in such a complex, fast-moving risk landscape? 

Laavanya Raju: In our new blog series, we look at how financial organisations can learn from Formula 1’s approach to risk management. Why? Because, over the decades, Formula 1 has successfully shifted its ways of thinking and working to find the sweet spot between making money and managing risk. The sport has done this in a highly regulated environment where budgets are tightly fixed.

Mark Crowhurst: But while financial organisations also operate under similar conditions, many are lagging behind when it comes to risk management. They are still segmenting, managing, and owning risks within separate teams. Much of the change they pursue is in response to regulatory and supervisory pressures, rather than business-led innovation and learning from mistakes.

Laavanya Raju: The decisions made are based on past experience, instead of evolving with each new learnings. And as events have shown, that’s simply is not enough to stay ahead of today’s interconnected and constantly changing world.

Mark Crowhurst: So, what can financial organisations do to steer a safe course through the challenges that lie ahead? It all starts with a resilient risk framework. While this might sound obvious, there’s a lot more that goes into building such a framework than organisations might think. It’s not just a one-and-done exercise. And it takes much more than putting a new team or piece of technology in place.

Laavanya Raju: Building an effective risk framework is a continuous evolution, made up of multiple, interconnected steps.

Mark Crowhurst: To go on that journey, financial organisations must think about:

One, shaping stronger risk governance and a culture where the second- and third line have the not only the capability but feel empowered and informed enough to challenge decisions including the commercial ones.

Laavanya Raju: Two, building a trusted foundation of shared data, which should be used by teams across the business to identify, measure, monitor, manage and report on risk;

Mark Crowhurst: Three, start building proof of values around how to apply AI to analyse risks in real time and spot sensitivities and patterns without human bias;

Laavanya Raju: And, finally, organisations shouldn’t only think about the risks they face, but the opportunities these present, so they can set themselves up to unlock more value from volatility.

Mark Crowhurst: Our blogs dig deeper into these questions. They reveal how financial services can revamp risk management to run more like a Formula 1 team – embracing collaboration, constant learning, shared data, and sophisticated tooling to keep the business better protected from existential risks, on the right side of regulation, and in the fast lane to commercial success.

Laavanya Raju: Because uncertainty isn’t going away. Businesses are always going to have to navigate new threats, disruption, and shocks. By evolving your risk management framework, you can go the distance ensuring your business is ready to outmanoeuvre uncertainty.