FTI Consulting Resilience Barometer Reveals Cybersecurity, Compliance and Sustainability as Top Concerns for UAE Financial Services
77% of CEO Surveyed Anticipated Data Hostage Situations Due to a Future Cyber Breach
One-Third of UAE Financial Institutions Reported Loss of Intellectual Property
80% of Financial Institutions are Struggling to Keep Pace with Financial Crime and Sanctions Regulations
Barometer Points to an Increase in Compliance Requirements with New Regulatory Regimes
Dubai, United Arab Emirates, 29 November 2022 — Financial services executives in the United Arab Emirates (“UAE”) reported widespread concern about cybersecurity, governance, compliance and ESG adoption amidst evolving economic and geopolitical uncertainties, according to the 2022 Resilience Barometer® GCC from FTI Consulting, Inc. (NYSE: FCN). Despite significant headwinds, the study, conducted in association with the Arab Bankers Association, reveals that financial institutions in the UAE can unlock powerful opportunities to build resilience and remain competitive.
Restructuring and M&A activities in the UAE and wider Gulf Cooperation Council (“GCC”) are increasing in volume and are particularly prevalent in the banking sector. The research shows that 50% of the corporate banking firms surveyed cited entering new markets as the top reason for exploring a merger or acquisition. Other major sectors with the same rationale included asset management and pension funds.
Key findings from the study include the following:
Cyber attacks ranked as the top risk for financial services firms in the UAE, as the push for artificial intelligence and data-driven tech adoption in financial services has taken on a new urgency. Against a backdrop of increased cyber attacks, 77% of leaders anticipated data hostage situations due to a future cyber breach, while one-third were concerned about their ability to retain cybersecurity talent due to market competition and high attrition. The study finds that while business leaders have identified digital vulnerabilities within their organisations, they remain reliant on the state to introduce data protection policies and compliance guidelines, with 82% of leaders looking to the government to set cybersecurity best practices.
“The banking and financial services sector is highly targeted by cyber actors, and properly combatting these threats requires a cyber readiness and resilience-based approach”, said David Dunn, Head of EMEA and APAC Cybersecurity at FTI Consulting. “However, 45% of respondents take a reactive approach to cybersecurity, despite data protection and corresponding laws being a top concern. A shift in mindset is required to implement programmes and processes that mitigate risk in advance of an incident, making the organisation safer and avoiding penalties from noncompliance.”
Intellectual property and data assets
Data protection concerns in the UAE may be justified — 31% of UAE firms reported having experienced a loss of intellectual property, which is higher than the GCC average of 28%. The 2022 Resilience Barometer® GCC also indicates that M&A are increasingly being viewed as an avenue for securing financial and operational resilience, with 36% of companies claiming that they conducted M&A to acquire data assets in the UAE, whilst 33% looked to secure intellectual property.
“Our research shows that cybersecurity and data protection remain a foremost concern for business leaders in the UAE financial services sector, yet the necessary budget and resources are not being adequately placed for risk mitigation,” said Abi-Gail Marshman, Head of MENA Financial Crime Compliance at FTI Consulting. “Due to evolving customer demand and rapidly changing sectoral dynamics, financial institutions in the GCC are increasingly looking to integrate and rely more heavily on progressive technologies, such as blockchain. Their infrastructure must be prepared to accommodate such advancements.”
The report points to the development of robust regulatory frameworks within the UAE that have strengthened corporate compliance standards. For example, the GCC-wide Anti-Money Laundering and Counter-Terrorism framework has led to better customer due diligence and Know Your Customer guideline implementation. However, as these frameworks continue to develop, the onus is on the companies to adapt and adjust. Eighty percent of leaders surveyed agree that their company is struggling to keep pace with the current regulations around tackling and addressing financial crime and sanctions risks.
Sustainability and socially conscious business practices are top of mind for chief executive officers in the GCC, particularly as the region hosts COP27 and COP28. Yet, the study shows that nine out of 10 chief compliance officers said that they currently do not have sufficient expertise to implement a fit-for-purpose ESG strategy. According to the survey, 82% of respondents agreed that their company is shifting its ESG approach away from managing risk to new business opportunities. Meanwhile, 80% actively align their business strategy to social purpose. This trend is more prominent in the insurance and payment services and fintech sectors, where 90% of respondents reported they had changed their approach to ESG.
Vikas Papriwal, Head of Middle East Corporate Finance and Restructuring at FTI Consulting, said, “Despite the deployment of increased resources to ESG-related activities, UAE financial institutions feel that they do not currently have sufficient ESG expertise to cope with growing scrutiny and adopting global ESG standards. They are also seeing mounting pressure from their stakeholders to adopt and demonstrate ESG credentials as a case for value creation.”
Financial and operational resilience
The research indicates that UAE financial institutions may be more financially and operationally resilient than their GCC counterparts, with 68% of respondents in the UAE expecting to undertake financial restructuring within the next year, compared to 78% in the rest of the GCC. Similarly, 68% of UAE respondents reported that they would restructure operations within the 12 months, compared to 80% of in the rest of the GCC.
About the 2022 FTI Consulting Resilience Barometer® GCC
The 2022 FTI Consulting Resilience Barometer® GCC, conducted in association with the Arab Bankers Association, incorporates the views of 400 decision-makers in large companies across countries that are part of the Gulf Cooperation Council — Saudi Arabia, United Arab Emirates, Bahrain, Kuwait, Oman and Qatar. Large companies are defined as those with more than 250 employees, over USD$50 million in annual global turnover or with a balance sheet of more than USD$43 million.
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