A:

Risks associated with investing in the banking sector include operational risk, market risk, cybersecurity, funding risks, liquidity risks, litigation concerning consumer protection, strategic risk, and uncoordinated or insufficiently analyzed changes in regulation/supervision.

The publication based on the results of Deloitte's global risk management survey reported that the risk of the highest priority is technology used to monitor and manage risk. The concern is over data quality and the management of that data. The needs of risk management technology are currently beyond the technology available.

Another risk involves the management team put in place to analyze and organize the risk data being provided by technology. As the global banking infrastructure changes with the growing global economy, managerial positions are becoming of a higher importance but are a possible weak point in the banking sector because of uncoordinated and insufficiently analyzed changes in regulation.

Management is also a key factor in consumer protection. With the growing technological ability to violate consumers' private banking information, there is an increased risk of litigation if the banking sector does not manage the protection and insurance of the consumer's assets.

The banks themselves are also at risk of violation of cybersecurity. Bank risk supervisors and directors are increasingly concerned about cyberattacks. Attacks are more frequent at larger banks. Constant monitoring and defenses must be upheld to prepare for such attacks, and even with all the protection, cyberattacks can still get through and constantly pose a risk.

Liquidity risks are always present in the banking sector. Investments need to be consistently monitored and investment strategies need to be firmly in place to decrease the risk of losing marketability of investments.

The banking sector was hit hard by the economic downturn in 2008, which caused banks to tighten regulations on loans and other services. The economy's stability is a big risk that recent history has brought to the surface. This affected most of the previously mentioned risks such as management, when banks were required to lay a lot of people off. The banks saved money by doing this, but they also lost many people who were responsible for analyzing data and creating strategies to protect the banks. When the banking sector decreases its managers and risk officers while tightening regulations on credit and loans, it makes it harder for consumers to work with the banks, which increases the risk of liquidity.

After the government bailout, the banking sector is still on shaky ground. This much government money has never before in history been given to banking institutions to uphold the foundations of the economy. Although the money needed was provided, there is still no evidence that risks presented in the economic decline have fully recovered.

Risks in the banking sector are decreasing and stability is improving, but there is still a great deal of insecurity when it comes to the future of the banking sector. There will always be risks in the banking sector. A strong economy supports strong banks, and strong banks support a strong economy, even with risks.

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