The Increasing Trend of Metaverse and Its Impact on Risk Managers

The increasing trend of Metaverse in technology is a topic of discussion nowadays. Metaverse is also a considerable factor that has an impact on financial service firms. Therefore, risk managers should learn and adopt this new trend of Metaverse to survive in the market as we cannot ignore a major development of technology and remain here.

Let’s discuss Metaverse in detail and its impact on the business’ risk management.

The World of Metaverse

In Metaverse, one can play a digital role called an avatar and experience different things like shopping, socializing, and other business-related things with it. One can experience virtual reality, augmented reality, and artificial intelligence—all technologies in one place. In other words, you can experience anything in the real world in Metaverse. You can even buy properties in Metaverse.

In Metaverse, one can do the transaction through digital assets, like NFTs and cryptocurrency. These digital assets help you to gain ownership of Metaverse.

Game-oriented Metaverse applications are the most famous. Some of the top Metaverse gaming applications are Minecraft and Roblox. However, it is said that Metaverse is now moving forward beyond the gaming industry. Jason Ekberg, Oliver Wyman’s partner which is Shanghai Based, is one of those people who believes that Metaverse is not only limited to the gaming industry.

Many global banks are also stepping forward to start the Metaverse projects. Some of the famous banks are HSBC and JP Morgan Chase. Moreover, there are also NFT financing platforms working for Metaverse.

Ekberg also believes that the discussions on Web 3.0 have made it possible to increase the interest in the Metaverse manifold. Ekberg says that the banks that adapt Web 3.0 will be more likely to grow more effortlessly. 

They are also able to make their work operations dynamic and effective in Metaverse. The decentralization in Metaverse and Web 3.0 enables you to keep control of your business and database. You will be more confident in your virtual business dealings.

Different Potential Risks for Risk Managers and Professionals

In a virtual world like Metaverse, there are two kinds of risks; one which is familiar,  and the other which can come or emerge as time goes on. According to Ekberg, the most obvious risks of Metaverse are virtual property rights and jurisdictional considerations. There are also several risks surrounding the financial market. Some of these risks are anti-money laundering, knowing your customer (KYC), and market risks of NFT trading.
Ekberg questions several factors regarding how firms will measure credit risks. He asked whether they will decide according to the number of friends of the obligor, or will the decision be based on the avatar of the person in the Metaverse. It shows that even the risks that are familiar need new approaches for data collection.

Furthermore, the most prominent risk of Metaverse is cyber risk. It is mostly caused by regulation as the system is decentralized. Therefore, Metaverse is in control of the algorithm and the crowd using it. It enables a lot of probabilities of getting into a lot of cyber risk and threats to the security of the users.

He also indicates that the data is available in multiple versions and jurisdictions. Hence, there are higher chances of risk or manipulation of data. The scale is also limited. He finds it interesting to witness what kind of risks will emerge in the future and how the risk professional will manage them.

Keeping digital payments gateways, Ekberg suggests that the Metaverse model will be relevant for these financial service firms. It will enable them to make the payment experience smoother and effortless.

He also points out the benefits Metaverse will bring to the financial service firms, such as easier accounts opening, selling NFTs, easier payments, etc. He envisions it. As the people will now be buying and selling real estate in Metaverse just like they do in the real world.

Potential Opportunities for Risk Professionals

As interactions and the metaverse world evolve, this will increase complexity, so risk management will likely play an increasingly prominent role as the metaverse grows.
The metaverse will challenge risk professionals to explore and manage their risks, as disruption is unavoidable. This “brave new world” will be the next big thing for risk managers.