Insights from CROs: Key Risk Issues Facing Financial Services Firms in Asia

As the region continues to develop economically, politically, and technologically, financial institutions face many challenges and opportunities unique to the Asian context. Understanding and mitigating these risks is paramount for sustainable growth and resilience, from fintech disruption to geopolitical complexities.

Through interviews with CROs across banks, asset managers, insurance companies, fintech firms, and central banks, we have obtained valuable insights into the Asia region's key risk issues and strategic considerations.

1. Current Risk Landscape in Asia

Fintech Disruption: The rise of fintech has revolutionised the financial services sector, presenting both opportunities and challenges. While fintech innovations have enhanced efficiency and accessibility, they also bring digital risks such as cybersecurity threats and operational vulnerabilities. The absence of traditional brick-and-mortar structures like branches and ATMs amplifies these risks, underscoring the importance of robust cybersecurity measures and risk management frameworks. CROs of fintech firms highlight the need to justify business cases in a rapidly changing environment, as many of these companies originated when money was cheaper and the world was more straightforward.

The Rise of AI: In a highly technology-driven region, the rise of AI represents a significant opportunity for Asia. However, CROs continue to emphasise the importance of testing these models and note that human judgement and input remain critical in risk management strategies for companies. Moreover, adopting AI introduces complexities related to data privacy, algorithmic transparency, and regulatory compliance which need to be carefully navigated, explored, and tested by senior management before being adopted.

Geopolitical Complexity: Asia’s geopolitical landscape is complex, with tensions and uncertainties impacting financial markets and regulatory environments. From trade disputes to territorial disputes, financial services firms must navigate through geopolitical risks that can significantly impact investment strategies, market stability, and regulatory compliance.

Financial and Non-Financial Risks: From FX and interest rate risks to operational and investment risks, financial institutions face many financial risks in their organisations. At the same time, non-financial risks such as data sovereignty, cybersecurity threats, and ESG considerations further compound the risk landscape. The rapid digitisation of financial services in Asia has brought unprecedented technological risks. Cybercrime and financial crime have increased, and fraudsters continue to target institutions and consumers in more sophisticated ways. In a more connected world, the ease of cross-border transactions has helped companies expand their customer base rapidly, translating to more significant risks of doing business in other countries. Financial institutions must invest in robust cybersecurity measures, risk assessment tools, and employee training to mitigate the growing threat of cyberattacks and data breaches.

Financial institutions in Asia are increasingly recognising the importance of mitigating climate change and transitioning towards sustainable energy practices. However, regulatory frameworks and guidelines on ESG (Environmental, Social, and Governance) are still evolving in the region, posing challenges in implementation and standardisation. CROs highlighted the difficulties in navigating climate-related policies and standards that differ across countries in Asia, as well as changing the rhetoric from ‘something we have to do’ to it being ‘the right thing to do.’

2. Unique Aspects of the CRO Role in Asia

CROs in Asia face unique challenges compared to their counterparts in other regions. They must navigate diverse cultural, regulatory, and market dynamics while balancing independence with business collaboration. Understanding the nuances of Asian markets, including age, cultural, and religious demographics, is essential for effective risk management of financial products and services that are unique to this region.

Diverse Market Dynamics: CROs in Asia must navigate diverse market dynamics, including the rise of broader Asian economies beyond China, such as India and Vietnam. They are expected to strike a balance between commercial acumen and independence, given the uniquely entrepreneurial business environment in the region.

Geopolitical and Cultural Understanding: Understanding geopolitical risks and cultural nuances is essential for effective risk management in Asia. CROs emphasise the importance of physical presence and experience in different countries to grasp the intricacies of local markets.

Adaptability and Commercial Acumen: Agility, adaptability, and the ability to articulate complex topics in a commercially understandable manner are key attributes for CROs in Asia. This region is fast-paced, young, and hungry, creating challenges and opportunities for greater integration and advancement of Asian economies.

3. Advice for Future Aspiring Asia CROs

Future CROs in Asia should prioritise continuous learning, agility, and adaptability. Building a diverse skill set that encompasses technical expertise, business acumen, and cultural intelligence is crucial. Embracing emerging technologies while focusing on risk assessment and mitigation strategies will be instrumental in navigating the evolving financial services landscape in Asia.

Continuous Learning: Future CROs should prioritise continuous learning and stay abreast of global developments, particularly in technology and regulatory trends. Many CROs emphasised how important it was in their careers to have ‘the right amount of change’ in terms of both internal and external job mobility, as well as spending time in different geographies. Skillsets are built through various situations, managing multiple stakeholders and risk types end-to-end.

Tech Baseline Understanding: A strong understanding of technology and its implications for risk management is essential, especially as Asia embraces digitisation and AI. The new generation of CROs often has too much data and information to hand, so understanding when and how to use technology and when to trust judgement and experience is key.

Diverse Mindset: Embracing diversity of thought and curiosity is critical for future CROs to navigate the evolving risk landscape effectively.

4. Technology Risks and Regulatory Compliance

Adopting technology in Asia's financial services sector presents both opportunities and risks. While advancements in AI, regtech, and suptech offer the potential for enhanced efficiency and compliance, they also introduce complexities related to data privacy, algorithmic accountability, and regulatory compliance. 

CROs in Asia must navigate through a multifaceted risk landscape characterised by technological advancements, geopolitical complexities, and evolving regulatory frameworks. By embracing adaptability, continuous learning, and a diverse mindset, future CROs can effectively mitigate risks and capitalise on emerging opportunities in the dynamic Asian market.

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