Financial institutions must invest more to build flexible scenario programmes or risk falling behind, as the pace of change in business needs and regulatory pressures threatens firms’ ability to manage risk effectively.
In our biggest-ever benchmarking exercise on the end-to-end scenario process, ORX Scenarios worked with 90 global financial institutions to report into a maturity matrix, spanning 22 scenario process areas.
Scenarios as a strategic risk management tool
We asked participating banks and insurers about the maturity, advances and challenges of their scenario process to better understand progress, but crucially the process enhancements urgently needed to fulfil the potential of scenario analysis as a strategic risk management tool.
The good news is that nearly 90% of firms are actively undertaking or planning enhancements to their scenario process, but often with limited resources. Greater investment is needed to prioritise the wider framework developments, accelerating digitisation and a rapidly evolving regulatory environment so that banks can see efficiency gains.
The report comes as ORX Scenarios reaches a 10-year milestone for its renowned Scenario Library, a database of over 1200 scenarios shared by more than 70 financial firms.
Six ways to optimise the scenario process
Reflecting on scenario priorities identified in the matrix alongside market drivers, ORX has created a six-point actionable plan to provide a foundation for future benchmarking and practical guidance:
- More strategic and business-led planning and coverage with alignment to wider strategic priorities and more collaborative campaign planning
- Streamlined review and reassessment to ensure proactive portfolio maintenance that is more standardised and less resource intensive
- Easily monitored metrics (data-led, more socialised, digitised) that will drive change and better optimise the trigger process
- Tactical planning, data, workshopping, tooling and documentation efficiencies to better harmonise the right assessment steps across different scenario programmes
- Deploying the right technological capabilities to optimise assessment execution with digitised assessment tools, integrated databases, and workflow automation
- More engaging governance models to make it easier for senior stakeholders and the 2LOD to provide data-led review and challenge.
The full details of these priorities can be found in the latest white paper from ORX Scenarios – State of the Industry 2024. This white paper is freely available for download, and ORX Scenarios subscribers can access both the white paper and the complete benchmark study.
Find out more
If you'd like to know more on this topic, you can also listen to our podcast episode on What are the future directions and priorities for the scenario process?, which explores headlines from the State of the Industry white paper
Don't forget, the State of the Industry White Paper is available to download for everyone, while the accompanying documents and Scenario Process Benchmark and Research Study are available to ORX Scenarios subscribers.
