4 Trends to make Risk Management a valuable currency in 2022
Technology is something that everyone missed and minimized a decade ago in the finance and accounting industry. But now, it is the core of everything that happens in the finance and accounting landscape. It is agreeable that Finance Risk Managers are usually busy professionals always looking for a breakthrough, but if you are too busy, you might miss the best trends to create nuance in your profession. Despite advances in technology, let’s not be hubris in being optimistic about the future. Here are 4 key trends that would shape the future of the finance industry and risk management career scope in 2022.
Private Risk Management taking center stage
The ongoing pandemic, climate change, and international conflicts have brought heavy pressure on governments leading to polarization, fracturing their decision-making ability to solve bigger challenges affecting global business growth. Private risk management players like corporates and non-profit organizations have taken the lead to cover the gap. An edging approach FRMs introduced is setting premiums on companies that comply with protecting society and the environment (ESG). Surcharging employees is the new norm to comply with vaccination norms and health measures. In doing this, FRM leaders are reducing the volatility of the global supply chain, increasing financial exposure, enabling smooth transportation, and saving margin profits.
Lowering the discount on Future
FRM professionals have a critical task of enabling societies and businesses to make progress on long-term threats. Risks seen in the far are normally ignored by people as they do not affect their behavior because of the dew of uncertainty and probability added to it. To overcome this challenge, risk managers strive to lower the discount rate to avert loss in the future by converting long-term threats into near-term opportunities. Of course, there can be a resistance felt among business leaders to comply with the top-end alternative solutions of switching to AI or ML, but at least they can shift their business process to the cloud to avoid immediate risks like data breaches, cut costs and avoid unnecessary regulatory penalties.
AI and ML
The rapid spread of pandemics has caused havoc to economies upturning business productivity and success. Part of the reason was outdated risk models that were not enough to compete with environments outside the model and human judgments, eventually leading simulations to fail. As a way forward measure, finance risk managers need to build diverse and broad risk models to support unprecedented risks counting various variables into the picture. Moreover, inviting AL and ML and Blockchain technologies reduces the risk of human intermediation and enhances real-time risk decisions. AI and ML would help risk management professionals shape regulations, understand human sentiments, forecast risk, politics, and market in a more successful way rather than substituting their roles.
Organization Resilience than Mitigating Risk
The Great Recession exposed the weakness of quantitative data collection and analysis to FRM leaders. This fueled the trend for incorporating cloud intelligence into financial risk management. FRM managers unlike earlier can depend on new-age tools and digital capabilities to explore the interrelationships between firms, customers, and industries and hidden risks across the supply chain. Raw data is not useful to Financial Risk employees unless they use analytical tools to predict risk and build resilient measures for the future. Risk can be of any sort: small or big, direct or indirect, but as financial risk strategists, one needs to build impactful risk plans so as to understand the links between organizational structures and external factors responsible for risks.
The future is always volatile and evolving, but advanced tech-integrated risk management would help risk analysts, strategists, and managers to stay ahead of the race.
Miles Education in an exclusive collaboration with Kaplan Schweser is now offering the Best FRM Program study package. FRM exams are now online! Say No to photocopied materials which significantly reduce your chance of success. Prepare with the world’s most trusted — Schweser FRM comprehensive study package and online test bank. Be exam-ready with original Schweser materials. LIVE online classes & mentoring by best-in-class faculty & industry experts from India and globally.