Luxembourg’s financial sector, a robust engine driving the nation’s economic prosperity, stands at a crossroads where regulatory compliance and risk management are no longer back-office functions but strategic imperatives that shape the core of business operations. With the entry into force of new regulations such as the EU AI Act or the Digital Operations Regulation Act (DORA), financial institutions are now expected to develop more robust governance structures, characterized by clear accountability and strong oversight mechanisms.
With the entry into force of new regulations, (…) financial institutions are now expected to develop more robust governance structures
The EU AI Act for instance emphasizes ethical artificial intelligence practices and mandates transparency in automated decisions, while DORA aims to bolster digital resilience against Information and Communication Technologies (ICT) disruptions. In this regulatory landscape, it is imperative for entities within the financial industry to reassess their approach to governance, third-party risk management, cybersecurity and data protection.
While seemingly onerous, these requirements present a unique opportunity for financial institutions to fortify their resilience and cyber capabilities, going beyond mere compliance. It is a transformative moment that calls for a shift in perspective – viewing compliance as a competitive advantage rather than a checkbox exercise.
Operational integration of these regulatory demands is crucial to fostering business growth and advancing the digital evolution of Luxembourg’s financial sector. In an environment where third-party risk management is increasingly critical, EY advocates a comprehensive and holistic approach, overseeing the entire digitalization process, and providing customized solutions with end-to-end support. Compliance, resilience and data protection should not be seen as the problem of only one department or function: these matter to the whole organization.
Operational integration of these regulatory demands is crucial to fostering business growth and advancing the digital evolution of Luxembourg’s financial sector.
A prime example is Third-Party Risk Management (TPRM): financial institutions in Luxembourg extensively depend on third parties, including intra-group companies, for business operations and ICT services. Establishing a comprehensive third-party risk management framework that incorporates the three lines of defense, legal, information security, and C-level executives is essential. Digitizing this process from start to finish can significantly enhance risk management, ensuring better data quality, accountability, and reporting, ultimately leading to an improved customer experience. With profound sector expertise, state-of-the-art solutions, and all-encompassing managed services, EY is well-equipped to help financial institutions turn compliance hurdles into steppingstones for growth and innovation. EY’s methodology, expertly combining technical acumen with regulatory and legal insights through its “Assess, Transform and Operate” approach, embeds a cohesive Governance, Risk and Compliance (GRC) strategy into the broader scope of business operations. This fusion not only positions entities in the financial sector to comply with stringent regulations but also equips them to carve out a distinctive market advantage.
EY is well-equipped to help financial institutions turn compliance hurdles into steppingstones for growth and innovation.
Through investment in digital transformation, enhancement of risk management frameworks, and a focus on cybersecurity and data protection, financial institutions can build a robust foundation that supports sustainable growth. Moreover, by cultivating a forward-thinking environment within financial organizations, one can stay ahead of change, effectively manage risks, and take decisive actions in the fast-paced world of digital transformation. For instance, the upcoming EU AI Act, which aims to regulate artificial intelligence and ensure its ethical use, underscores the importance of proactive adaptation and compliance to maintain a competitive edge and mitigate potential risks associated with AI technologies. In this context, digitalization enhances data protection by implementing advanced security measures, ensuring data integrity, and enabling efficient monitoring and management of risks, thereby safeguarding both the institution and its customers.
With the right partner, financial institutions can navigate this new era with confidence, turning regulatory complexities into opportunities for innovation and success. The shifting landscape of compliance and risk presents a strategic opening for organizations to strengthen their foundations and establish a firm market presence. At EY, we bring together a team of legal, regulatory, and technology experts who, with our deep industry expertise, allow us to help clients not only meet compliance but also efficiently transform risk management practices, leveraging technology and digitalization.
With the right partner, financial institutions can navigate this new era with confidence, turning regulatory complexities into opportunities for innovation and success.
In this regard, our Cyber and Digital Risk practice, led by four partners, comprises over 50 professionals, including regulatory experts, GRC specialists, lawyers, and cyber consultants.. Thus, risk and compliance become a catalyst for innovation, propelling the financial sector toward a future that is not only compliant but also competitive and visionary.
Authors:
EY Luxembourg Partner, Consulting, Cyber and Digital Risk
EY Luxembourg Partner, Consulting, Cyber and Digital Risk
EY Luxembourg Partner, Cybersecurity Leader, Cyber and Digital Risk
EY Luxembourg Partner, Consulting, Cyber and Digital Risk