Four Key Skillsets for Risk and Compliance Professionals in 2023

 

What will be the talent hotspots in Risk and Compliance in 2023? Reliable crystal balls are few and far between so rather than roll the dice we’ve taken a look at some of the trends that are already unfolding and that will continue to be factors through 2023 and – based on these – have identified four Risk and Compliance skillsets that we think are likely to be in high demand over the coming twelve months:

 

Supplier Management

The FCA (Financial Conduct Authority), PRA (Prudential Regulation Authority), and Bank of England are introducing a new regime by which to manage systemic risks posed by critical third parties (CTPs) who provide material services to the UK financial sector. The Treasury is expected to begin designating service providers as CTPs in 2023. CTPs will have to meet minimum resilience standards, and the financial institutions they serve will need to introduce resilience testing and review their current contractual arrangements for compliance with the new standards. Add to this a backdrop of high inflation raising input costs for many suppliers, along with rising global trade tensions (e.g., between the US and China over diversifying high tech supply chains away from China, and the adverse knock-on effects on US-EU trade relations) and it’s a safe bet that skills in supplier risk evaluation, resilience testing and strategic supplier management are going to be highly prized.

 

Customer Management

The FCA released its new Consumer Duty rules in July 2022 designed to set a higher level of consumer protection in financial markets and representing a major evolution in FCA supervision. The rules will apply to new and existing products and services open to sale or renewal from July 31st 2023. Critically, the new rules are “end-to-end” in nature and set expectations right the way along the customer management lifecycle – from product and service design, to pricing, to information provision and promotions, to customer service. Second line risk and compliance professionals who have a strong understanding of marketing and customer management are going to be in high demand.

 

Credit Risk Management

The most recent outlooks for the UK and Eurozone suggest that they may both just manage to avoid recession in 2023. Nonetheless this overall picture masks the great number of households and businesses that will face difficult circumstances as high inflation and weaknesses in economic activity continue to bite. At this stage in the cycle, high quality credit risk management skills – in strategic credit portfolio and limits management, pricing, underwriting and arrears management – will be key. Ensuring that these activities are conducted in a fashion consistent with good customer outcomes will be vital.

 

Regulatory Impact Assessment and Lobbying 

In December 2022 the Chancellor of the Exchequer outlined a package of measures – collectively known as the Edinburgh Reforms – designed to drive growth and competitiveness in the UK Financial Services sector post-Brexit. These regulatory reforms could be the most important since the creation of the PRA/FCA and are divided into four categories: a competitive marketplace; promoting effective use of capital; sustainable finance; technology and innovation. A wide range of EU law will be up for review in 2023 including Wholesale Markets (UK MiFID); the Solvency II Directive; Packaged Retail and Insurance-Based Investment Products; the Payment Services Directive, amongst many others. A wide range of UK Financial Services firms will need to devote significant resources to regulatory impact assessments and lobbying and trade association work to input into and influence the reforms.

 

There are of course going to be many other talent and skillset hotspots in 2023 (e.g., who would bet against a continued rise in cybersecurity threats?), but these strike us as some that will be particularly relevant at this point in time rather than being driven by longer-term trends.