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Transforming wealth and asset management: Navigating risk with AI and technology-driven innovation

Multidisciplinary professional services organization

08 minute read 09 Jun 2026

In brief

Firms are prioritizing AI for risk identification and monitoring activities to support a more efficient and effective oversight of traditional and emerging technology-related risks.
By investing in technology and proactive risk ownership, wealth and asset managers can navigate complexities, build resilience and stay competitive.

EY's WAM Risk Pulse Survey highlights how firms are addressing enterprise risks through AI, technology, governance and operational efficiency.

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.

33%

Of surveyed firms have identified and are exploring AI use cases

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

Bar chart showing how organizations are applying artificial intelligence, including generative AI, and machine learning to transform risk management, highlighting that risk identification and emerging risk horizon scanning is the most common use at 40%, followed by review of advertising and marketing materials at 33%, while risk assessments, internal risk reporting, financial crimes monitoring, and training and knowledge management are each cited by 27%, and regulatory change management and regulatory horizon mapping or scanning trails at 20%, illustrating that AI adoption is concentrated in forward-looking risk detection and compliance-related activities.

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

Stacked horizontal bar chart showing survey results on the most impactful risks for asset and wealth management organizations over the next 12 months, with respondents able to select multiple options and impact levels ranging from severe to no impact. Cybersecurity stands out as the most critical risk, dominated by severe and significant impact, followed closely by operational resilience excluding cybersecurity and economic risk, both largely rated as significant or moderate. Third-party and nth-party risk and AI and AI governance risk show a balanced spread across significant and moderate impact, with a smaller share of severe impact. Emerging technology risk including blockchain and crypto and talent risk are mainly viewed as moderate, while political and geopolitical risks are evenly split between significant and moderate impact. Environmental, social and governance and climate change risk is primarily assessed as moderate, with minimal severe impact overall, highlighting a broad shift toward medium-term, systemic risk concerns rather than isolated low-impact issues.

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.

Bar chart comparing the reported use of GRC platforms, AI tools and data analytics across seven risk and compliance activities to show where technology adoption is strongest. GRC platforms are most widely used across all activities, peaking at risk assessment and risk identification at 79 percent each and remaining high for issues management at 71 percent and risk event management at 64 percent. AI usage is more moderate, led by reporting and communication at 46 percent, with lower adoption across issues management, risk assessment and risk identification at around 21 percent. Data analytics shows its highest use in reporting and communication at 69 percent and risk event management at 50 percent. Respondents were able to select multiple options, highlighting overlapping use of technologies across activities.

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

Horizontal bar chart showing key practices used to manage AI risk and the share of respondents adopting each approach, included to highlight areas of maturity and gaps in AI governance. The most common practice is having a dedicated plan to address generative AI risks at 80%, followed by policies governing the use of generative AI by partners and suppliers at 73%. Sixty percent report having a policy restricting the use of foreign AI models such as DeepSeek and the same share have formally trained or briefed the entire organization on generative AI risks. In contrast, only 20% indicate having a budget specifically allocated to mitigating AI-related risks. Respondents could select multiple options, indicating that organizations often use several risk management practices in parallel.

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

Horizontal bar chart illustrating the role of governance structures in organizational risk management practices, included to show how widely formal oversight mechanisms are embedded. The chart shows that 86% of respondents discuss risk management at the board level, making it the most common governance practice. Seventy‑one percent report having a distinct risk management committee overseeing both financial and nonfinancial risk, while 64% indicate regular risk reviews by first‑line committees. Fewer organizations integrate risk management into other committee structures at 43%. A smaller share say the risk management committee primarily focuses on nonfinancial risk at 21%, and only 7% report having no structured committee‑based approach to risk management. Respondents could select multiple options, reflecting overlapping governance models.

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

Vertical bar chart showing the key activities performed by first‑line risk resources, included to illustrate where operational risk ownership is most concentrated. The chart indicates that control design and risk event management are the most common activities, each reported by 92% of respondents. Risk identification and assessment and issues management follow closely at 75% each, showing strong first‑line involvement in identifying and addressing risk. Half of respondents, 50%, say first‑line teams are responsible for risk metrics and reporting. Fewer organizations rely on first‑line resources for control testing and monitoring and for chairing business risk committees, both cited by 33%. Overall, the chart highlights a strong focus on design, execution and ownership of risk within the first line, with more limited involvement in oversight‑oriented activities.

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

Horizontal bar chart presenting insights into organizational risk management funding allocation over the past 12 months to highlight priority investment areas. The chart shows that the most common funding increases are for technology solutions for risk management and for cybersecurity and risk management programs, each cited by 71% of respondents. Sixty‑four percent report investment in uplifting existing risk management programs such as risk assessment and issues management. Half of organizations, 50%, have funded the development and implementation of a formal risk management framework. Lower but still notable investment is reported for business continuity and disaster recovery planning and for third‑party risk management programs, both at 43%. Overall, the chart indicates a strong emphasis on technology and cybersecurity, with comparatively less but meaningful focus on resilience and third‑party risks.

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

Horizontal bar chart showing key considerations organizations are prioritizing to enhance operational efficiency over the next two years, included to highlight where future transformation efforts are most focused. The chart shows that implementation of AI use cases is the leading consideration at 93%, followed by adoption of new internal tooling at 87%, indicating a strong emphasis on technology‑driven efficiency. Use of offshore resources is cited by 60% of respondents, while 47% focus on standardizing foundational data elements such as process, risk and control taxonomies. Fewer organizations prioritize outsourcing specific functions at 33% or shared ownership of technology platforms at 27%. Establishing risk management centers of excellence or shared service models is the least cited consideration at 20%. Overall, the chart underscores a clear shift toward AI and digital enablement as the primary drivers of future operational efficiency.

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

Vertical bar chart illustrating the extent of expected changes in dedicated risk management headcount over the next two years, comparing first‑line and second‑line functions to show workforce planning trends. The chart indicates that the most common expectation is a modest increase of 1% to 10%, reported by 36% of both first‑line and second‑line respondents. Twenty‑seven percent of first‑line respondents expect no impact and a further 27% anticipate an increase of 11% to 25%, compared with 21% and 14% respectively for the second line. Larger increases of more than 25% are expected by a small share, 9% for the first line and 14% for the second line. A decrease of 1% to 10% is reported only for the second line at 14%. Overall, the chart highlights a general expectation of stable to moderate headcount growth, with slightly stronger growth anticipated in first‑line risk roles.

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.

Authors:

Tom Campanile, EY Global and Americas Financial Services Risk Consulting Leader
Dan Narbonne, EY Wealth and Asset Management Risk & Regulation Leader (US)
Jen Franklin, EY Wealth and Asset Management Non-Financial Risk Leader (US)

A special thanks to additional contributors of this article:

Megan Palazzo, EY Wealth and Asset Management Risk Consultant
Lauren Raiford, EY Wealth and Asset Management Risk Consultant

Summary

The EY Wealth and Asset Management Risk Pulse Survey highlights how firms are evolving their risk strategies by embracing AI, machine learning and technology to tackle both traditional and emerging risks. Emphasizing stronger governance, firms are integrating risk management into frontline operations and enhancing collaboration between risk teams. Despite varied adoption rates, there is a clear trend toward modernizing risk practices with AI-driven tools and formalizing AI governance. Investments focus on balancing innovation with responsible oversight, improving operational efficiency and fostering a culture of accountability, positioning firms to better manage risks and seize opportunities in a dynamic financial environment.

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EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

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