2022 Priorities of Focus for Financial Institutions

As we continue to look ahead, what risks and enhanced areas of focus will 2022 bring?

Compliance Priorities

As compliance risk remains heightened, various regulations and compliance-related areas continue to face increased scrutiny.

Financial institutions must continue to enhance their efforts surrounding fair lending and enforce it as a top priority. It is important that compliance reviews embody the formation, operation and outcomes of fair lending decisions.

A review of the institution’s overdraft program should also be a priority. As the impact tends to be greater for lower-income customers, banks should be considering updates to their program features to assist in providing alternatives to overdrawing accounts. These practices should be easy to understand and fully disclosed to customers.

Although compliance with regulatory requirements is essential, financial institutions should also be focusing on their overall effectiveness and efficiency across the organization. This entails automating processes and enhancing third-party relationships.

Cybersecurity Focus

As the trend is showing no sign of slowing, ransomware can be devastating for financial institutions, especially if regular data backups are not maintained. Threat monitoring, incident response and overall risk management are critical when preventative tools fail. Additionally, even with sophisticated monitoring tools in place, employees are still recognized as a significant risk to cybersecurity. Continuous education on best practices is vital to strengthening the front line of defense.

Financial institutions may do a good job of protecting their networks from invasion, but cyber risks remain. Various solutions in the industry are available to help deliver control of cybersecurity. 

Interest Rates

Although interest rates have been low and margins have remained steady, volatility is likely to emerge.  Inflation will be a key driver in terms of the frequency and volume of increasing rates.  As a result, financial institutions should review and potentially revamp their interest rate risk management and asset liability management strategies.  This will help ensure effective management in a more volatile interest rate market.

Given the continuing economic uncertainty, risk management and governance have become more crucial for success in the banking industry.  A strong governance structure must be in place to ensure that the appropriate decisions are being made by management and that up-to-date information consistently flows throughout the organization.  New risks will continue to emerge related to social and financial issues.