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Navigating an evolving risk environment

Financial institutions face complex risks from tech, cyber threats, climate, and regulation; proactive, holistic risk management is essential.

08/26/2025 · 5 minute read

Rapid technological advancements, shifting consumer expectations, ever-present cyber threats targeting sensitive data and operational integrity, and other risks are creating significant challenges for financial institutions. Amid a climate of uncertainty and unpredictable macroeconomic conditions, traditional and emerging threats are converging, creating a tumultuous risk landscape.

At the same time, as the industry continues to evolve at a fast clip, reliance on third-party vendors and interconnected systems are introducing potential vulnerabilities that need to be identified, quantified, and managed.

These multifaceted risks can challenge the operational resilience of financial institutions like yours and may threaten companies’ competitive edge in an increasingly crowded marketplace. Success often depends on a proactive and comprehensive approach to risk management that allows you to navigate this increasingly complex environment with the goal of better protecting your firm’s long-term viability.

3 risk categories impacting the FI industry

The ever-changing risk landscape is forcing financial institutions to adapt quickly to evolving challenges. Addressing them effectively requires a thorough understanding of incoming risks and how they might impact your organization. 

The myriad risks that could derail your growth trajectory typically fit into three main categories:

Changes in the risk and operating environment

A multitude of risks are contributing to heightened volatility for the FI industry. For example, cybersecurity risks have escalated as financial institutions rely on interconnected systems and third-party vendors, which expands the potential attack surface. As the use of artificial intelligence (AI) becomes more pervasive, threat actors are deploying advanced attacks, particularly related to social engineering and fraud. Further, severe weather-related events, such as storms, wildfires, and other climate-related risks, can impact loan portfolios and in some cases insurance costs and even availability, suggesting that a reevaluation of risk assessment models is needed.

Risks are becoming more complex and interconnected, and their scope and variety is expanding. Emerging risks continue to gain prominence in this evolving landscape. 

Operational strategy and growth trajectory

As you seek to innovate and expand your service offerings, companies like yours encounter complexities integrating new technologies within an operating environment that may be highly dependent on legacy systems. With more players entering the market, there is increased competition and more pressure to identify avenues for growth. As one example, while cryptocurrency and digital asset investments may bring opportunities, they can also present challenges that require close analysis and a strategy to better mitigate risks. 

Strategic shifts — both to remain competitive and maintain profitability — are expected to have short- and long-term risk impacts, creating an opportunity to assess risk over a multi-year time horizon.

Regulatory changes 

The regulatory environment remains in a state of flux. Discussions around the potential of deregulation have raised questions about the future of oversight and compliance requirements. The potential for state-specific regulations in the case of decreased federal-level oversight may add another layer of complexity that could lead to your leadership team trying to navigate varying compliance landscapes across jurisdictions. This risk environment calls for vigilance in understanding how any changes may impact your operations, particularly in terms of governance, risk management, and consumer protection. 

Predicting and responding to regulatory change may be helped by a proactive and adaptable approach.

Holistic risk management strategies required to tackle risks

The multitude of risks that can impact financial institutions has heightened the urgency for businesses to reassess their risk management frameworks. A holistic approach to risk management that considers the interplay between these risks may help drive success in an increasingly crowded industry.

Understanding the evolving nature of risks and the implications for operations and finances may help better position your company to navigate challenges and seize opportunities for growth.

This is the first article in a series. We will next explore these risks in more depth to help you understand the potential implications for your business.

For more information, contact your Marsh representative.

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Jackie Quintal

Jacqueline Quintal

Managing Director & Digital Asset Leader

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