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The attention of banks and insurance companies has recently focused on activities aimed at increasing efficiency and reducing costs. The resulting situation around COVID-19 significantly accelerated their digitization. The introduction of such significant changes in the functioning of companies has also affected their ability to recover from the negative effects of a pandemic. Predictions indicate that global premiums are expected to recover to pre-crisis levels in 2021. However, banks and insurance companies must remain vigilant also because, in addition to financial losses related to the pandemic, long-term low-interest rates do not have a positive effect on their income. Besides, given the current situation, investment returns remain subdued.
Of all insurance segments, it is life insurers who are facing the most difficult challenges The industry is
closely monitoring the potential impacts on mortality rates however, we expect that life insurers may also
feel significant impacts due to what is happening in the financial markets.
The COVID 19 crisis raises operational, credit and capital risks for the banking sector, while also adversely
impacting its profitability and financial stability COVID 19 affects banks in different ways depending on
the type of bank, its size, and its geographical location. Four main risks come to the fore in this regard:
1. Operational risk
2. Credit risk
3. Performance risk
4. Capital risk
In addition to the increase in operational power problems, the banking sector is exposed to other risks, such as payments postponement and default risk increase, uncertainty with government support measures, as well as an increased risk of failure of partners and service providers.
Every change brings with it a certain risk. The changes to which societies are exposed today are long gone to the economy. Therefore, risk management is becoming an important determinant of the future operation of B&I as well as other companies.
WHY RISK MANAGEMENT IS MORE IMPORTANT NOW THAN EVER
B&Is
use risk management to “predict the unpredictable to navigate its risks and opportunities In the
context of the pandemic, it is critical to first update your risk profile as the pandemic may have brought to
light risks you had not yet considered or may have shifted your risk register in terms of priority and sense of
urgency.
Some of the key focus areas are:
- Credit risk
- Liquidity risk
- Market risk
- Capital management
THE RIGHT SERVICES, THE RIGHT SOLUTIONS, THE RIGHT TIME.
BDO has global reach to support our clients’ risk advisory needs and objectives The Global RAS team spans more than 160 countries and is committed to sharing the knowledge and best practices gained from years of experience working with financial services companies.
You can read more in the attached publication.
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