Risky Business in Financial Services

How financial services innovation is challenged by macroeconomic factors, SEC regulation, and the hidden cost of working with technology vendors.

Would you like to see the expanded version of this round-up? Visit our Substack page here to subscribe and receive the full article every week in your mailbox.

These are the articles and insights our team is excited about this week:

• The Chief Risk Officers Outlook's first edition by the World Economic Forum identifies global risks tied to economic instability, political tensions, and rapid AI technology advancements, urging better regulation and self-regulation to address reputational and data breach risks.

• The SEC has proposed new rules compelling broker-dealers and investment advisers to address conflicts of interest linked to predictive data analytics and related technologies in their interactions with investors, prioritizing investor protection and requiring written policies and procedures to meet these obligations, with a 60-day public comment period.

• Technology presents advancement opportunities in the financial services industry, but banks face the risk of losing control and time to technology vendors, leading to high costs and time spent on vetting potential vendors. This article, by Patrick Sells, shares that for every $1 billion in assets, banks spend about 3,000 hours vetting vendors, resulting in a hidden cost of $100,000 annually.

• The SEC adopts rules mandating public companies to disclose cybersecurity breaches within four days if it affects their financial status, and to annually disclose cybersecurity risk management and executive expertise, aiming for transparency, but concerns exist over challenges for smaller companies.