Artificial intelligence and cloud computing rank among the top technology risks

The most important growing risks for global financial institutions are technology, cybercrime and business disruption.

These are driven by the explosion of artificial intelligence, as well as concerns about the use of cloud computing, which appear for the first time in this annual study, according to ORX Horizon 2024 research of 48 global financial services businesses.

The Horizon survey, released by ORX, the global operational risk association, showed that cybercrime remained the top emerging risk for the third consecutive year, followed by technology and digital strategy and business service disruption in third place.


Figure 1: Normalized Borda scores based on participants’ ranking of risk categories

In an additional breakdown, participants were asked to identify and prioritize the top five technologies that pose the highest risk to their companies in the next 12-36 months and five years.

Artificial intelligence and cloud computing were the frontrunners, with both listed as urgent priorities.

Figure 11: Values ​​represent normalized Borda counts for each technology.

Natural language processing chatbots powered by generative AI technologies have significantly raised the profile of artificial intelligence in the past year.

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Key future concerns include how this technology might be used by criminals or how it might affect the way businesses operate now.

Additionally, companies are concerned about the potential risk of concentration associated with the financial sector’s reliance on major technology vendors, even as the sector becomes more resilient in its use of cloud computing.

Steve Bishop, director of research and information at ORX shared: “High levels of concern about technology and digital strategy as an emerging risk factor point to an increasingly integrated, digital and data-driven work environment and the risks around increasing reliance on key technology service providers.

“Firms are telling us that the rapid development of generative AI is accelerating the adoption of new tools to keep pace with innovation and remain competitive. But there are significant risks around this, including those related to data protection and regulatory compliance. Firms also want assurance over the design, integrity and reliability of AI-based models. All of this needs significant investment in risk management capability.”

The paper also highlights the following key risk challenges in AI adoption:

Monitoring and control

  1. ‘Loss of control’ over results from AI and machine learning tools
  2. Unexpected or incorrect algorithmic results causing potential reputational damage
  3. Lack of skills or lack of training
  4. Relying on manual checks to ensure accuracy of AI results

Ethics, privacy and data regulation

  1. The unregulated nature of AI increases the risk of fraud or cyber-attacks
  2. Data privacy concerns due to lack of trust in data storage, transmission and use
  3. Guidance on the ethical use of AI in business decision-making is limited
  4. Generating AI may use data that is protected by copyright or IP rights, which may be infringed

Cyber ​​security threats

  1. AI tools are lowering the barriers to entry for cyberattacks
  2. The ability for AI tools to be used to bypass existing controls, identifying vulnerabilities

Below are some of the main risk issues with cloud computing:

Limited number of suppliers and associated risk of concentration

  1. Disruption or cyber attacks on these suppliers could cause widespread disruption
  2. Supplier performance issues can have downstream impacts
  3. Limited supplier resources may limit growth opportunities

Data security, management and control

  1. Firms report lack of visibility and monitoring around cloud service providers’
  2. Customer and Customer Data Security and Availability
  3. Monitoring and maintaining compliance with cross-border regulations

Effective supplier management

  1. Switching between suppliers can be prohibitive due to cost and complexity
  2. Ineffective supplier utilization monitoring can lead to unbudgeted or unexpected costs

Bishop added: “We need to closely monitor the development and application of AI – tackling the challenge of managing increased third-party support while increasing technical expertise in-house with education and training to help mitigate risk.

“It’s an overview of AI vision and the evolving use of cloud computing. We need to continually adapt and evolve our risk frameworks to keep up with the pace of change.”

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