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Bank of Canada hikes interest rates by a full percentage point – Industry roundup: 13 July

Bank of Canada hikes interest rates by a full percentage point

The Bank of Canada made the most aggressive rate hike since 1998 by raising its benchmark interest rate by one percentage point on Wednesday to drive inflation downward.

“With the economy clearly in excess demand, inflation high and broadening, and more businesses and consumers expecting high inflation to persist for longer, the governing council decided to front-load the path to higher interest rates,” the bank said in its rate decision statement. Canada’s central bank also made it clear that even more rate hikes are in the offing in the coming months, too.

The bank’s governing council voted to raise its policy rate to 2.5% from 1.5% to cool down an overheated economy by sharply increasing the cost of borrowing. This is the fourth consecutive interest rate increase since March. Most economists had expected a 75 basis point increase, and this larger than expected hike in interest rates has surprised investors and economists.

The bank now expects the rate of inflation to average 7.2% in 2022 and 4.6% in 2023 – considerably higher than it forecast in April.

Ransomware is still cybersecurity’s biggest challenge: CyberWeek2022

Sixty percent of organizations were hit with ransomware last year, according to the Sophos State of Ransomware 2022 Report. With cyberattacks proliferating and cybercriminals continuing to exploit vulnerabilities faster than ever, Lindy Cameron, CEO of the UK’s National Cyber Security Centre (NCSC), states that ransomware still remains cybersecurity’s biggest challenge in a recently published tech story in VentureBeat that focused on CyberWeek2022.

At CyberWeek 2022, the 12th edition of Israel’s largest cybersecurity event, hosted in Tel Aviv, Cameron said that while it might seem that more sophistication has gone into bolstering security across organizations and nation states in recent years, all hands must be on deck to root out ransomware. 

“Ransomware attacks strike hard and fast and they’re evolving rapidly. They’re pervasive [and] increasingly offered like games-as-a-service, lowering the bar for entry into cyberspace — and that’s what makes them such a threat,” observed Cameron.

“The changing geopolitical landscape [has] transformed the context for work in the cybersecurity space,” she said, acknowledging the impact of the Russian-Ukraine war on the changing face of cybersecurity. “While Russia is up to this physical oppression, conducting a cyber campaign — which seems to be no surprise — Russia has consistently used cyber pressure to stress its rivals.”

To help stamp out the onslaught of ransomware attacks, Cameron called for increased cooperation between institutions, technology companies, government and its agencies. She reiterated that work must continue in the area of understanding the scale, nature and evolution of the techniques being used in order to make ransomware an unprofitable and unattractive business.

Cameron concluded her session by reiterating that the NCSC is working with partner agencies and organizations to ensure that a society where cyberattacks can be repelled is possible, adding that “cybersecurity is second nature to all of us.”

Risk management processes in U.S. corporations aren’t keeping pace with growing risks

Most finance executives do not believe their organizations’ risk management processes provide strategic advantage (63% state no or minimal advantage), according to a new report by the American Institute of CPAs (AICPA) and North Carolina State University’s Enterprise Risk Management (ERM) Initiative.

The 2022 State of Risk Oversight: An Overview of Enterprise Risk Management Practices study includes insights from a survey of 560 U.S. CFOs and senior finance leaders conducted in winter 2022. The survey measured finance-related executives’ assessments of the level of maturity in their organization’s proactive management of these risks through adoption of enterprise risk management (ERM) processes. 

As per the report, 65% of senior finance leaders agree that the volume and complexity of corporate risks have changed “mostly” or “extensively” over the last five years. The COVID-19 pandemic, the war in Ukraine and related economic sanctions, lingering supply chain challenges, continued social unrest, cyber threats, the great resignation, soaring inflation, and a host of other risk triggers are key drivers impacting an organization’s business model and increasing calls for enhanced risk management. Despite these complexities of risks, more than two-thirds of organizations surveyed still cannot claim they have “complete ERM in place,” and just over a quarter (29%) rate their organization’s overall risk management oversight as “mature” or “robust.”

The study further revealed that less than 20% of organizations believe their risk management processes provide strategic advantage. “This is surprising given most leaders understand that risk and return are inseparable realities,” according to the report

The survey highlighted that the adoption of ERM processes in the U.S. is on the rise. Over the last 13 years, the percentage of organizations that claim to have put ERM processes in place has increased from 9% to 33%, but that still suggests a majority of corporations have yet to adopt ERM processes.

Additional key findings from the report include that a majority of boards of directors are calling for more senior executive involvement in risk oversight, with almost three-fourths (74%) signalling there will be significant changes to their existing continuity and crisis management planning.

Most organizations in India now investing in risk management capabilities: PwC report

Indian organizations are taking risk management seriously. 

In the current uncertain economic environment, nearly eight in 10 corporate executives in India say that keeping up with the speed of digital and other transformations is a significant risk management challenge, according to a new report by global consulting firm PwC.

The 2022 Global Risk Survey – India highlights saw the participation of 109 Indian leaders as respondents, with corporate executives making up 72% of the sample and the rest being divided between risk management (13%), audit (10%) and compliance (6%). The respondents operate in a range of industries – financial services (12%), industrial manufacturing (17%), retail and consumer markets (14%), energy, utilities and resources (4%), technology media and telecom (35%), health (17%), and government and public services (1%).

While 88% of corporate leaders are increasing their spending on technology and digital capabilities in the risk function workforce in the country, 64% of business executives report that their risk function is actively seeking external insights to assess and monitor risks.

“In an environment where change is constant, risk management capabilities provide the greatest value to board members and business leaders when they are embedded within the organization’s strategic planning and decision-making processes,” said Sivarama Krishnan, Partner and Risk Consulting Leader, PwC India.

“The changing work environment brought on by the pandemic continues to disrupt talent and labour markets. Supply shortages, sanctions and rising raw material costs are heightening risks within supply chains as organizations deal with upstream supply chain risks related to subcontractors and other fourth parties that further complicate risks. Many executives find the need to revise and adapt their strategies and operating models at a rapid pace,” as per the report. "Investment in risk processes, frameworks and enabling systems is needed to help an organization deploy a standardised and consistent approach to risk management."

The report further added, “When organizations embrace risk management capabilities as a strategic organizational capability, they are five times more likely to be very confident in delivering stakeholder confidence, a growth-minded risk culture, increased resilience, and business outcomes.”

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