Richard Whiting on 4most’s expansion plans in the European banking sector

Europe’s banking landscape is set for a raft of risk and regulatory changes in the coming year. Richard Whiting, partner at 4most, explains how the consultancy firm is helping its clients to adapt to the changing landscape.

You very recently joined 4most to lead its European division as part of its ongoing expansion, can you tell us a little more about what attracted you to make the move?

I spent over 12 years at PwC and had been contacted many times for a new role, but the opportunity to set up and lead 4most’s European office was unique. I like to challenge myself and this role sounded like a great opportunity to grow both personally and professionally. I decided that it couldn’t hurt to have a few conversations to understand what 4most and the role were all about.

One conversation led to the next, and I quickly realised the strong focus on expertise combined with a people-first culture. On top of that, I have British roots and instantly felt a connection with the team at 4most. They really have a no-nonsense mentality and gave me the trust and freedom to share my ideas and drive the European growth strategy.

Could you give us an overview of the services that 4most offers, and what your new role will involve?

4most is a specialist analytics consultancy – we support clients to get more insights out of their data, manage risks effectively and do it in a way that satisfies the needs of regulators and supervisors. We primarily support banks and insurers and have over 270 experts working from six offices across the UK, Europe and the Middle East.

My role will be setting up and heading our Amsterdam office, focusing on expanding our banking consultancy services further into Europe, in areas such as model development and validation, risk management, stress testing, data and regulatory compliance.

How do you see the European banking landscape evolving in the next few years, particularly in terms of risk management and regulatory demands?

The European banking landscape will change significantly over the next few years. One of the most pressing changes will be the increasing demands around Environmental, Social and Governance (ESG) risk and reporting. The European Central Bank (ECB) is putting more pressure on banks to strengthen their risk management framework around ESG.

Additionally, new reporting requirements such as the Corporate Sustainability Reporting Directive (CSRD) demand greater transparency, which in turn will lead to better information availability for risk management. Banks will need to adapt their strategies and infrastructure to meet these expectations.

Another key area of development lies in technology risk, especially with the rapid development of generative artificial intelligence (AI). While banks are leveraging AI for various applications like chatbots and staff efficiency improvements that result in cost savings, model risk management has yet to fully catch up. The implementation of the EU AI Act introduces a new layer of regulatory compliance that banks must integrate into their risk frameworks.

Geopolitics also remains an ongoing challenge and has been marked as one of the ECB’s supervisory priorities. Managing this type of risk is difficult, requiring robust processes and a capacity for quick adaptation. These trends and topics are constantly evolving and banks need to closely follow the developments in regulation, expect more supervisory scrutiny and ensure their risk management is future proof.

How can banks alter their risk management to better identify, manage, and mitigate geopolitical risks in today’s increasingly volatile global landscape?

Geopolitical risks tend to be infrequent with high impact, which is something we deal with in climate risk management as well. Therefore, banks can use methods here that are similar to those used in managing ESG risks. This includes identifying key geopolitical risks and mapping the transmission mechanisms through which those risks impact traditional risk types such as credit, market and operational risk.

Scenario analysis also plays a crucial role in quantifying the impact of risks and defining what the response should be to manage and mitigate these risks. As geopolitical tensions can arise and increase every day, continuous monitoring is essential to ensure that banks can adapt swiftly and remain resilient.

What steps can banks take to enhance their model risk management as they incorporate increasingly complex AI-driven risk models into their operations?

Banks should first distinguish between “traditional” AI and generative AI driven models, as their risk profiles and management requirements vary considerably. Model risk management (MRM) for generative AI is still in its infancy and banks are yet to develop comprehensive solutions. Generative AI can be unpredictable and requires banks to think creatively on how to validate and assess specific use cases.

It is important to restrict use of public generative AI solutions as there is a risk that staff might input bank confidential information. Next to this, centralising efforts within the bank and setting up clear standards for development and validation of generative AI solutions helps in reducing risks.

Further reading: AI can improve operational risk management in banking.

Looking ahead to 2025, what are the key objectives you would like to tick off in your first year in your new role?

My key objectives will be to expand our client base in Europe, building brand awareness, setting up strategic partnerships and hiring a strong core team of experts in our Amsterdam office. Growth is not always easy, and I realise it will not be a straight line. Our culture and values are key to our success, and I will make sure I do not compromise this for anything.

All in all, I am looking forward to what 2025 will bring and excited to be part of the team at 4most.