A new era in the risk management of financial firms

Official URL: https://dx.doi.org/10.1007/978-3-030-38858-4_17

This contribution analyzes how new technology has changed the risk management landscape for financial companies. Accelerating technological innovations in the finance industry have disrupted the old order and created new challenges and opportunities along with new front-runners and followers. New payment systems, digital currencies, and digital investments are just some examples of these innovations. Formerly self-sufficient financial companies had to collaborate with FinTech companies in order to protect market shares. Technological innovations and collaborations among companies in the finance sector do not create new risks; rather, they increase the affectedness to some risks types and extend the definition of traditional risks, such as operational, reputational, and legal risks. E-financing activities, outsourcing in financial companies, and cyber threats are the major new risk sources that financial companies must embed to traditional risks. Risk management principles in the digitalization era guide the risk manager to tailor specific practices for each finance company.