In today's fast-paced financial world, wealth and asset management (WAM) firms encounter new challenges that demand quick thinking and innovative solutions. To explore how these firms are adapting, Ernst & Young LLP (EY US) launched its inaugural WAM Risk Pulse Survey. The findings reveal how industry leaders address the complexities of a shifting risk landscape. By embracing AI and technology-led innovation, focusing on risk fundamentals, and strengthening first-line ownership, WAM firms can boost their operational performance, strengthen first-line ownership, and deepen their competitive edge. Discover how you can navigate these challenges and thrive in the evolving market. Read the full survey insights to learn more.
A focus on technology-driven risk transformation
Artificial intelligence (AI) and machine learning (ML) are reshaping risk management in meaningful ways. WAM firms are increasingly identifying, exploring and deploying AI, generative AI (GenAI) and ML use cases to digitally transform their risk management practices.*
Among firms using AI and ML, 40% are applying these technologies for risk identification, 33% for reviewing advertising and marketing materials, and 27% for improving training and knowledge management.
This shift creates a more data-driven and responsive approach to risk. As AI and ML adoption continues to grow, WAM firms should focus on tech-driven risk management and strong governance practices to navigate evolving risks effectively.
At the same time, firms are increasingly recognizing the importance of the data that feeds these AI systems and the technologies they are looking to build across teams. Attention is growing in strengthening data quality, accessibility, and integration to enable AI use cases at scale and support consistent adoption across the organization.
The most significant ways organizations are using AI or generative AI (GenAI) and ML to digitally transform risk management practices
A shift towards technology-driven vulnerabilities
WAM executives were asked to identify which risks they considered most impactful to their organizations over the next 12 months.* While traditional risk areas such as economic, geopolitical and political factors continue to be cited as highly impactful, the survey results highlight a notable shift: technology‑driven risks are increasingly viewed as among the most severe. In particular, cybersecurity, third‑party and Nth‑party dependencies, and emerging AI and AI‑governance risks stand out as areas where firms anticipate some of the most significant disruptions.
These findings suggest that while macro‑environmental challenges remain important, WAM firms are placing heightened focus on technology‑related vulnerabilities that have the potential to reshape their risk landscape in the year ahead.
Most impactful risks to asset and wealth management organizations over the next 12 months
Mapping technologies in the risk lifecycle
Technology enablement across the risk lifecycle varies significantly among firms. When asked which technologies their organizations have implemented in the risk lifecycle,* many WAM firms report that they depend on traditional governance, risk, and compliance (GRC) platforms, indicating that modernization progresses slowly.
However, we also observed that leading firms achieve meaningful transformation in risk management by integrating legacy systems with emerging AI tools throughout the risk lifecycle. This approach enhances their ability to manage risks effectively and adapt to a rapidly changing environment.
Understanding AI risk management practices
As firms accelerate the adoption of AI and GenAI, governance and risk oversight are a top priority. Most firms are establishing dedicated plans, formal policies, and staff training to manage AI risk. Organizations are increasingly embedding governance, monitoring and controls within existing risk, compliance, technology, and business functions. This approach reflects a broader, enterprise-wide commitment to balancing innovation with responsible risk management.
We have observed that organizations recognize the potential risks of emerging technologies and are taking proactive steps to support the responsible use of AI. By implementing these strategies, firms can enhance their risk mitigation efforts and foster a culture of accountability.
Key practices or approaches to AI risk management
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Understanding risk coverage within governance structures
When asked how risk is covered by their organization’s governance structures, the majority of WAM firms reported that risk management is increasingly seen as a vital part of effective governance, essential for informed decision-making, organizational resilience, and strategic direction.* While risk management is well-established within governance frameworks, there is a noticeable shift toward integrating risk oversight into first-line committees (64%), moving beyond traditional second-line or board-only structures.
While financial risk continues to be primarily managed by investment risk officers, we have observed that there is a growing emphasis on independent second-line oversight for financial risks, indicating a more robust and mature approach to financial risk governance. This evolution is enhancing the overall effectiveness of risk management within organizations.
Role of governance structures in your organization's risk management practices
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Evolving responsibilities of risk management
Second-line functions
When asked to describe the role of second-line functions, the majority of WAM firms report that the second-line risk management function plays an active role in facilitating risk identification and assessment, including providing independent oversight and challenge.
In addition, we have observed that the second-line risk management function is increasingly taking on a more proactive role in supporting business partners. This involvement extends beyond mere advisory or challenge functions to include facilitation and oversight, reflecting a shift toward greater engagement in the risk management process.
First line functions
When asked to describe the key activities performed by first-line risk resources, the majority of firms surveyed responded that they are enhancing first-line risk ownership by adopting hybrid models that blend dedicated risk teams with embedded resources in daily operations.
These teams take on critical responsibilities such as control design (92%), risk event management (92%) and issues management (75%), fostering a more proactive and integrated approach to risk management.*
Key activities performed by first-line risk resources
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Assessing the organizational risk reporting structure
When asked how risk leadership is structured within their organizations, WAM firms reported a range of approaches across both the first and second lines of defense*. At the enterprise level, most firms have formally established a CRO role, though reporting lines and responsibilities vary. In organizations where risk management has not yet been elevated to the C‑suite, these responsibilities are often carried by senior leaders, such as Heads of Enterprise Risk Management, ensuring that risk maintains visibility and influence at the executive level.
Additionally, many organizations are implementing business‑aligned risk officers within the first line to support day‑to‑day risk ownership, primarily reporting to business unit (BU) leadership or the Chief Risk Officer (CRO). This range of models highlights the different ways WAM firms are adapting their leadership structures to meet today’s increasingly complex risk environment.
Prioritizing funding for risk management initiatives
When asked how their organizations allocated risk management funding over the past 12 months, WAM firms reported directing investment toward both foundational capabilities and targeted enhancements.* Technology solutions for risk management and cybersecurity programs were among the most common areas of recent funding, reflecting firms’ focus on strengthening core infrastructure while modernizing their risk functions. Additional investment in areas such as risk program uplift, risk‑framework development and business continuity and disaster recovery indicates continued emphasis on building a resilient and well‑governed risk environment.
Firms expect this momentum to continue:
69% of WAM firms anticipate increasing their risk management budget over the next 12 months compared with 2025.
This outlook reinforces that risk management remains a strategic priority as firms prepare for a more complex and technology‑driven operating environment.
Insights into your organization's risk management funding allocation during the past 12 months
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Exploring strategies to improve operational efficiency
When asked to report what their key considerations will be for enhancing operational efficiency within the next two years,* the majority of WAM firms chose implementation of AI use cases (93%), new internal tools (87%), and outsourcing (60%) leading the way. This shift indicates a willingness to rethink traditional operating models for smarter and faster risk management.
Key considerations for enhancing operational efficiency within the next two years
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Forecasting change in the risk management headcount
When asked to describe the extent of expected changes in dedicated risk management headcount over the next two years, WAM firms reported that they have built strong risk management teams across both the first and second lines. While many firms are exploring efficiency opportunities such as the use of AI and other tooling, this has not yet translated into expectations of reduced staffing. Firms overwhelmingly anticipate growth across both lines of defense: 73% expect increases in first‑line risk headcount and 65% expect increases in the second line.
Extent of expected changes in dedicated risk management headcount over the next two years
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Conclusion
The survey shows that WAM firms are at an inflection point: the business is changing faster than ever, and risk functions must evolve to keep pace. As traditional risks morph and technology‑driven risks accelerate, firms are increasingly investing in modern risk capabilities, particularly data, technology and AI‑enabled tools.
These investments reflect a shift in how firms view risk — not as a gatekeeper, but as an enabler of confident, informed decision‑making. Embedding risk more deeply into first‑line processes and governance structures strengthens collaboration, improves responsiveness and supports innovation.
To remain competitive and resilient, firms recognize that continued innovation in both foundational and technology‑enhanced risk capabilities is essential.
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