Key Governance, Risk & Compliance Trends for 2024
As we step into the year 2024, the financial sector is poised for significant transformations in the realm of Governance, Risk, and Compliance (GRC). In a collaborative effort between FinTech Global and ViClarity’s annual trends report, we present the pivotal themes that will influence the industry in the upcoming year.
1. Regulatory Emphasis on Third-Party Risks and Consumer Financial Protection
Regulatory frameworks are tightening their grip, especially within the financial sector, as they strive to enhance operational resilience. A key focus is placed on bolstering consumer financial protection and scrutinizing third-party risks.
ViClarity anticipates 2024 will witness an escalated focus on assessing vendor connections to financial institution systems and evaluating vendor compliance competency. Third-party vendor management personnel are now integral to organizations, given the evolving regulatory landscape.
To fortify risk management efforts, technology automation is being integrated to ensure process consistency, identify outliers, alert teams to missed deadlines, and manage assignments efficiently. Non-compliance of third-party vendors with consumer protection regulations poses a significant threat to financial institutions.
Vendor due diligence extends beyond the surface, encompassing ongoing initiatives related to personally identifiable information (PII) compliance and cybersecurity protections. Regulators are expected to closely monitor these aspects throughout 2024.
2. Rigorous Testing of Cybersecurity Plans
Financial institutions are entrusted with sensitive consumer data daily, making it imperative to maintain trust. This responsibility is further underlined by stringent regulations, as cyber incidents can lead to financial losses, reputational damage, and legal consequences.
In 2024, the focus is expected to shift towards rigorous testing of cybersecurity plans and incident response programs. The dynamic nature of cybersecurity threats necessitates proactive measures to ensure these plans remain effective.
Financial institutions may turn to external consultants for assistance in developing cybersecurity incident response policies or reviewing existing plans to ensure alignment with regulatory requirements. Continuous testing and adaptation to the evolving cybersecurity landscape will be crucial to safeguard consumer data and meet regulatory expectations.
3. The Role of AI in GRC
Generative AI, powered by natural language processing models, has become a versatile tool with applications across various industries, including regulatory and compliance spaces. Advancements in AI within the RegTech sector offer opportunities for automation of regulatory compliance tasks, risk assessment models, data processing, and regulatory scenario simulations.
However, organizations must address ethical considerations, data security, and privacy when deploying AI for regulatory purposes. Ogie Sheehy, founder and Global CIO of ViClarity, noted, «Companies are looking to see how AI can help them be more innovative and predict outcomes for large volumes of data processing.»
Despite concerns, the prevailing trend indicates businesses’ openness to exploring AI capabilities and integrating them into their operations.
4. Pursuit of a Single Source of Truth
As non-compliance consequences grow more severe, organizations are actively seeking comprehensive, centralized approaches to data integrity, compliance, and risk management. Establishing a «one source» of data is essential—a singular, authoritative repository that forms a reliable foundation for risk analysis, policy adherence validation, reporting, analysis, and overall compliance.
Presently, data silos hinder easy accessibility and comprehensive understanding, posing challenges for achieving a holistic view and regulatory compliance. Contemporary solutions offer a streamlined and efficient path to a unified data source, promising reduced costs, enhanced compliance measures, and informed decision-making for financial institutions.
In 2024, those who overlook this imperative may face financial penalties, operational risks, and damage to their reputation. The pursuit of a single source of truth is set to become an integral part of the GRC landscape.
The year 2024 holds significant developments in the GRC landscape within the financial sector. Third-party risks, cybersecurity, AI integration, and a unified data source are among the critical trends to watch, as organizations adapt to evolving regulatory demands and seek innovative solutions to enhance their governance, risk management, and compliance practices.