A year of uncertainty

The global financial industry is in a state of flux as it navigates the rapidly changing geopolitical landscape, volatile macro conditions, and higher-for-longer interest rates in response to sticky inflation.

The industry is grappling with challenges from an evolving risk environment, emerging compliance mandates and proliferation of next-generation technologies.

To counter the cost pressure, the CFO vertical of financial institutions needs to strategise, streamline and transform the operation model and optimise cost.

Emerging trends

The financial industry is at a critical juncture, where it must not only meet the business and regulatory requirements but also prepare for the future by exploring new areas and embracing latest technologies.

Here are some top trends across the board.

Regulatory mandates

The key regulatory mandate knocking on the doors of financial firms is Basel III Endgame, wherein numerous changes have been proposed.

New exposure sub-classes, along with a grading mechanism, has been introduced in credit risk. In market risk, the simplified standardised approach and advanced standardised approach have been initiated.

The credit valuation adjustment framework has undergone significant modifications. The newly introduced ‘haircut floor’ for non-centrally cleared securities financing transactions can significantly impact liquidity in the US market.

Further, there have been additions and modifications to Pillar 3 reports and common reporting templates, coupled with disclosure enhancements.

The implementation of these changes and the complexity of jurisdictional nuances could lead to a surge in risk-weighted assets with higher minimum capital requirements for banks.

Rise of sustainable finance

Climate change and increased investor awareness of environmental, social and governance (ESG) factors are driving the adoption of sustainable finance, an emerging segment.

With climate change impacting the economy and risk stripes across financial institutions, governments and regulators globally have introduced regulations to promote sustainable investment.

Technological advancements

Generative artificial intelligence (GenAI) has taken the financial industry by storm, with its applications spanning verticals.

Firms are also adopting big data solutions, cloud-based platforms, advanced analytics and business intelligence (BI) to harness the full power of technology.