Name: The future of risk management: climate, AI, and third parties
Uploaded: 2024-10-11T11:49:27.102Z
Duration: 461.03
Description: Join Richard, Chief Risk Officer at The Belize Bank, as he discusses the primary emerging risks facing the banking sector today. Highlighted risks include climate change, with an emphasis on the anticipated heightened hurricane activity, third party cyber risks due to cloud service migration, and the adoption of artificial intelligence (AI) in banking.

RMA.INT.05 - Look Kin.mp4

RMA.INT.05 - Look Kin.vtt

English

{{00:00:04}}
Richard, thank you so much for joining
me today at RiskMinds Americas.

{{00:00:07}}
Tell me what are the emerging risks
that are keeping you occupied nowadays?

{{00:00:12}}
That's a great question, Lili.

{{00:00:13}}
I think, the main one, I think,
especially for a bank that I run, or I'm

{{00:00:17}}
the CRO at in Belize, is climate risk.

{{00:00:20}}
It falls under the umbrella of ESG
risk, but climate risk really is the

{{00:00:24}}
one that I think is at the forefront.

{{00:00:26}}
All right.

{{00:00:26}}
Everyone said for this year, the
hurricane season is expected to be

{{00:00:30}}
one of the strongest or one of the
longest and most active on record.

{{00:00:34}}
It started off very scary, I think, at
the beginning because there was barrel

{{00:00:39}}
that came through the Eastern Caribbean.

{{00:00:41}}
It touched through Jamaica.

{{00:00:42}}
It actually went north of Belize
and then went into the US.

{{00:00:45}}
It's been quiet since then,
but, this is just one year.

{{00:00:48}}
It's climate risk is going to
be something that is going to

{{00:00:50}}
be with us years going forward.

{{00:00:52}}
So that's definitely one
that I'm working with.

{{00:00:54}}
Another one is third party risk.

{{00:00:56}}
As a bank, we are moving a lot
of our services into the cloud.

{{00:00:59}}
And with moving to the cloud, that
brings with itself efficiency,

{{00:01:03}}
but at the same time a new set
of risks that you have to manage.

{{00:01:07}}
So those are two of the big ones.

{{00:01:08}}
And then the third one that I think
everyone talks about is obviously AI.

{{00:01:12}}
We haven't gotten very far on the
journey as yet in terms of putting

{{00:01:16}}
in place AI within the bank.

{{00:01:18}}
But it's something we know that
we need to do because if we don't,

{{00:01:22}}
we're gonna fall behind the curve.

{{00:01:23}}
And that is probably the bigger risk than
not adopting AI at this point in time.

{{00:01:28}}
So how do you think these risks will
develop, especially for these bank?

{{00:01:31}}
Climate risk is so quick and so
many regulations are coming in.

{{00:01:35}}
Same with ai.

{{00:01:36}}
Yeah.

{{00:01:36}}
So what do you see of
in the future for 2025?

{{00:01:39}}
I think for us what we've actually
looked at especially on the climate

{{00:01:42}}
risk side is we've actually now engaged
ourselves a consultant who's going

{{00:01:46}}
to help us develop our frameworks
from a total ESG perspective but also

{{00:01:51}}
from a climate finance perspective.

{{00:01:53}}
I think for us it's important that we get
ahead of it as well before the regulators

{{00:01:57}}
within Belize come with those regulations
and tell us what we need to do.

{{00:02:02}}
We found in the past it works for us
because as we've gotten ahead of it.

{{00:02:06}}
When the regulator has come, they've
adapted what we've put in place.

{{00:02:11}}
So we see ourselves being the market
leader in Belize on these things.

{{00:02:15}}
Still learning, obviously, from
the rest of the world, but being

{{00:02:17}}
ahead of the game in those things.

{{00:02:19}}
So that's on the climate risk side.

{{00:02:20}}
On third party risk management,
again, not a lot has been put in

{{00:02:24}}
place by the regulator, so we're
trying to get ahead of that.

{{00:02:27}}
But it's a real and present risk
for us at this point in time, like

{{00:02:30}}
I said, because we've moved in to
the cloud with our core banking and

{{00:02:34}}
other services that we're going to do.

{{00:02:36}}
And then for AI, definitely nothing on
the horizon as yet from a regulatory

{{00:02:39}}
standpoint, but again, we need to put
in place the framework as to how we will

{{00:02:44}}
continue, or how we will manage risk at
this point in time in terms of people

{{00:02:49}}
using AI and what they're allowed to do
and not allowed to do within the bank.

{{00:02:53}}
Absolutely.

{{00:02:54}}
And of course, there's always an
ethical question around its use

{{00:02:57}}
and just a lot of calculate, A
lot of careful considerations.

{{00:03:01}}
I was just wanting to touch upon you
mentioned three of these different risks,

{{00:03:04}}
but obviously in some ways they will
be interconnected with, the traditional

{{00:03:08}}
risks that your bank is already handling.

{{00:03:11}}
So how do you see the future of them
impacting on other risks and how are

{{00:03:16}}
you going to incorporate these into
the more traditional side of things?

{{00:03:20}}
So it's a great question.

{{00:03:22}}
I think climate risk is one
of the easiest to think about.

{{00:03:25}}
Definitely if we don't think about it
and how climate risk will impact parts

{{00:03:30}}
of our portfolio, we're not going to
be able to manage credit risk properly.

{{00:03:33}}
So one of the things that we need to
look at is do these properties, let's

{{00:03:37}}
say mortgages that we're financing,
are they in a flood prone area?

{{00:03:42}}
Are they in an area that is more prone to
be damaged if a hurricane comes through?

{{00:03:47}}
Are we going to finance
those going forward?

{{00:03:49}}
And are we putting ourselves at risk
from a competitive standpoint by one,

{{00:03:54}}
coming out of that space, or charging
higher rates at the end of the year?

{{00:03:57}}
So that's the interconnection
from a climate risk standpoint.

{{00:04:00}}
From a third party risk standpoint, what
is key from a, I'll call it a traditional

{{00:04:07}}
risk perspective is, cybersecurity, you've
had to protect your systems within your

{{00:04:13}}
own premises, now you have to figure out.

{{00:04:15}}
Is there enough protection that
your cloud provider has from

{{00:04:18}}
a cyber security perspective?

{{00:04:19}}
What are they doing from a
data protection perspective?

{{00:04:22}}
And then from an operational
resilience perspective, what do I

{{00:04:26}}
have in place if something goes wrong?

{{00:04:28}}
You're in a small country, you
need to be connected to the rest of

{{00:04:33}}
the world through internet links.

{{00:04:34}}
What if something goes wrong?

{{00:04:36}}
What if another crowd strike happens?

{{00:04:37}}
What is your backup plan or your BCP plan
to ensure that you can continue to operate

{{00:04:42}}
your business at the end of the day?

{{00:04:44}}
And then from an AI risk or AI
perspective, I think there's

{{00:04:48}}
huge potential for AI to help
us manage risk going forward.

{{00:04:52}}
Whether it be from a AML compliance
perspective and helping to analyze large

{{00:04:56}}
volumes of data and provide trends to an
analyst to actually do work with rather

{{00:05:02}}
than having them sift through the data.

{{00:05:04}}
AI also has a role to play on the credit
side in terms of credit scoring and

{{00:05:08}}
helping us make better decisioning.

{{00:05:10}}
So I think.

{{00:05:11}}
While AI is a risk, that one has
the most, I'll call it potential, to

{{00:05:15}}
help us manage risk going forward.

{{00:05:18}}
Amazing.

{{00:05:19}}
I know we just talked about the
interconnectedness of all these risks

{{00:05:22}}
and we talked about them as emerging
risks, but what about the present risks?

{{00:05:27}}
How how do you balance managing the
present risks, the traditional risks,

{{00:05:32}}
and the things that are already on your
plate, while also trying to innovate

{{00:05:37}}
and incorporate these new ones in?

{{00:05:40}}
So I think you need to have a strong team.

{{00:05:42}}
You need to have a team that is
focused on the present and the now.

{{00:05:46}}
I think that helps you to manage
with what's on the plate right now.

{{00:05:50}}
I think as well, communication is huge.

{{00:05:52}}
It may sound a little bit understated,
but if sitting in the second line,

{{00:05:57}}
you're not having conversations with the
first line about what's going on, one,

{{00:06:01}}
you're not going to know what's going
on presently is impact, potentially

{{00:06:04}}
impacting you, but what are those emerging
risks that they're seeing as well?

{{00:06:08}}
Because they're the ones
facing off with clients.

{{00:06:10}}
They're the ones talking to
third party service providers.

{{00:06:13}}
You need to have that conversation going.

{{00:06:16}}
And then to be quite honest, in terms
of how I keep my eye going forward

{{00:06:20}}
it's just continual learning, whether
it's just being online, looking at

{{00:06:24}}
what the latest trends are, coming to
conferences like this one and listening

{{00:06:27}}
to what people are talking about.

{{00:06:29}}
That's how you understand what's on the
cutting edge, but it helps to come to

{{00:06:34}}
something like this and have conversations
with people to understand what's the fad

{{00:06:38}}
and what's real at the end of the day.

{{00:06:40}}
To me, the easiest one is AI.

{{00:06:42}}
Last year, the conversation was all
around AI and what the benefits would be.

{{00:06:47}}
Now, it's dialed back a bit because
people are like can we really do

{{00:06:51}}
all of that at the end of the day?

{{00:06:53}}
But it is still something that
definitely will impact going forward

{{00:06:57}}
and I think It's, as a lot of people
have said, a game changer in banking

{{00:07:00}}
and other industries as well.

{{00:07:03}}
Absolutely.

{{00:07:04}}
And yeah, it sounds like everything
comes down to communication, isn't it?

{{00:07:07}}
Even within your team,
outside your team, everywhere.

{{00:07:11}}
Amazing.

{{00:07:11}}
Richard, thank you so
much for joining me today.

{{00:07:13}}
Thank you very much.

Richard, thank you so much for joining
me today at RiskMinds Americas.

Tell me what are the emerging risks
that are keeping you occupied nowadays?

I think, the main one, I think,
especially for a bank that I run, or I'm

It falls under the umbrella of ESG
risk, but climate risk really is the

Everyone said for this year, the
hurricane season is expected to be

one of the strongest or one of the
longest and most active on record.

It started off very scary, I think, at
the beginning because there was barrel

It actually went north of Belize
and then went into the US.

It's been quiet since then,
but, this is just one year.

It's climate risk is going to
be something that is going to

So that's definitely one
that I'm working with.

As a bank, we are moving a lot
of our services into the cloud.

And with moving to the cloud, that
brings with itself efficiency,

but at the same time a new set
of risks that you have to manage.

And then the third one that I think
everyone talks about is obviously AI.

We haven't gotten very far on the
journey as yet in terms of putting

But it's something we know that
we need to do because if we don't,

And that is probably the bigger risk than
not adopting AI at this point in time.

So how do you think these risks will
develop, especially for these bank?

Climate risk is so quick and so
many regulations are coming in.

So what do you see of
in the future for 2025?

I think for us what we've actually
looked at especially on the climate

risk side is we've actually now engaged
ourselves a consultant who's going

to help us develop our frameworks
from a total ESG perspective but also

I think for us it's important that we get
ahead of it as well before the regulators

within Belize come with those regulations
and tell us what we need to do.

We found in the past it works for us
because as we've gotten ahead of it.

When the regulator has come, they've
adapted what we've put in place.

So we see ourselves being the market
leader in Belize on these things.

Still learning, obviously, from
the rest of the world, but being

On third party risk management,
again, not a lot has been put in

place by the regulator, so we're
trying to get ahead of that.

But it's a real and present risk
for us at this point in time, like

I said, because we've moved in to
the cloud with our core banking and

And then for AI, definitely nothing on
the horizon as yet from a regulatory

standpoint, but again, we need to put
in place the framework as to how we will

continue, or how we will manage risk at
this point in time in terms of people

using AI and what they're allowed to do
and not allowed to do within the bank.

And of course, there's always an
ethical question around its use

and just a lot of calculate, A
lot of careful considerations.

I was just wanting to touch upon you
mentioned three of these different risks,

but obviously in some ways they will
be interconnected with, the traditional

risks that your bank is already handling.

So how do you see the future of them
impacting on other risks and how are

you going to incorporate these into
the more traditional side of things?

I think climate risk is one
of the easiest to think about.

Definitely if we don't think about it
and how climate risk will impact parts

of our portfolio, we're not going to
be able to manage credit risk properly.

So one of the things that we need to
look at is do these properties, let's

say mortgages that we're financing,
are they in a flood prone area?

Are they in an area that is more prone to
be damaged if a hurricane comes through?

Are we going to finance
those going forward?

And are we putting ourselves at risk
from a competitive standpoint by one,

coming out of that space, or charging
higher rates at the end of the year?

So that's the interconnection
from a climate risk standpoint.

From a third party risk standpoint, what
is key from a, I'll call it a traditional

risk perspective is, cybersecurity, you've
had to protect your systems within your

own premises, now you have to figure out.

Is there enough protection that
your cloud provider has from

What are they doing from a
data protection perspective?

And then from an operational
resilience perspective, what do I

You're in a small country, you
need to be connected to the rest of

What is your backup plan or your BCP plan
to ensure that you can continue to operate

And then from an AI risk or AI
perspective, I think there's

huge potential for AI to help
us manage risk going forward.

Whether it be from a AML compliance
perspective and helping to analyze large

volumes of data and provide trends to an
analyst to actually do work with rather

AI also has a role to play on the credit
side in terms of credit scoring and

While AI is a risk, that one has
the most, I'll call it potential, to

I know we just talked about the
interconnectedness of all these risks

RiskMinds & QuantMinds

Expert Insight

Join Richard, Chief Risk Officer at The Belize Bank, as he discusses the primary emerging risks facing the banking sector today. Highlighted risks include climate change, with an emphasis on the anticipated heightened hurricane activity, third party cyber risks due to cloud service migration, and the adoption of artificial intelligence (AI) in banking.