Community banks play a vital role in serving local communities, but face a rapidly evolving risk landscape in 2025. From increasing regulatory scrutiny to rising threats like cybersecurity breaches and third-party vulnerabilities, the pressure to stay ahead has never been greater. At the same time, many community banks operate with limited resources and lean teams, making it difficult to keep pace using traditional, manual processes.

These challenges are compounded by shifts in the broader financial environment, economic uncertainty, digital transformation, and heightened fairness, transparency, and data protection expectations. As regulators raise the bar on accountability and resilience, community banks must prioritize the most pressing areas of risk to remain compliant and competitive.

Community financial services banks can adopt smarter, software-based approaches to risk management rather than relying on reactive strategies or costly outsourcing. This blog explores the top five risk priorities for community banks in 2025. We’ll also outline practical strategies, including how AI and automation can help institutions strengthen compliance, enhance oversight, and manage risk proactively.

Risk Priority #1: Strengthening BSA/AML Compliance

In 2025, as regulatory scrutiny intensifies, BSA/AML compliance remains a top risk priority for small business banking. Banks must ensure they effectively identify, monitor, and mitigate the risk of financial crimes. Key focus areas include accurate risk assessments, timely Suspicious Activity Report (SAR) filings, comprehensive transaction monitoring, and consistent employee training. Regulators are particularly concerned with smaller institutions perceived to have weaker controls, making proactive BSA/AML risk management essential for maintaining regulatory standing and community trust.

Community financial services banks can strengthen BSA/AML efforts using preloaded BSA/AML and OFAC risk assessments that cover customer types, geography, services, and transaction behavior. These assessments help banks stay current with changing risk profiles and operational environments.

Risk Priority #2: Cybersecurity Readiness

Cyber risks continue to escalate in frequency and complexity, posing serious risks to community banks. Attacks like ransomware, phishing, and vendor breaches can result in severe financial loss and regulatory consequences. Remote work and digital expansion have only increased the attack surface, making robust cybersecurity programs essential. In 2025, regulatory bodies will emphasize IT governance, response planning, and third-party cybersecurity standards.

A modern approach starts by centralizing cybersecurity and vendor risk tracking to identify and close gaps. Community financial services banks should conduct regular vulnerability assessments, penetration testing, and internal audits to evaluate system resilience. Employee training plays a critical role. The frontline staff must recognize phishing and follow data protection best practices.

Risk Priority #3: Ensuring Fair Lending Practices

Fair lending remains a key regulatory focus as institutions strive to eliminate bias and promote inclusive access to credit. Community banks must ensure marketing strategies, underwriting decisions, and loan servicing practices comply with the Equal Credit Opportunity Act (ECOA), the Fair Housing Act, and evolving Community Reinvestment Act (CRA) expectations. Failure to detect and correct disparities can lead to serious legal and reputational consequences.

Small business banks should implement standardized fair lending risk assessments to review approval rates, denial reasons, and pricing patterns across demographic groups. Regular reviews of digital marketing strategies are also essential to ensure algorithms and ad placements don’t unintentionally exclude protected classes.

Risk Priority #4: Managing Vendor and Third-Party Risks

As reliance on third-party providers grows, so does the importance of vendor risk management. Community financial services banks must ensure vendors meet cybersecurity, performance, and regulatory standards. Poor oversight can result in data breaches, operational disruptions, or compliance failures. Regulators expect robust vendor due diligence, active monitoring, and clear contract terms.

Banks can streamline oversight using integrated vendor risk management tools to centralize due diligence, performance reviews, and document tracking. These platforms support scalable onboarding, real-time monitoring, and enforcement of service-level agreements. AI-powered tools enhance efficiency by flagging anomalies, automating risk assessments, and prioritizing high-risk vendors.

Risk Priority #5: Preparing for Regulatory Changes

Regulatory changes continue to emerge across data privacy, fintech partnerships, CRA modernization, and climate-related disclosures. Community banks must stay agile and informed to remain compliant and avoid penalties.

Adopting tracking tools helps compliance teams stay ahead in community financial services banks. Although AI-powered assistants recommend policy changes and help deliver targeted training, ensuring staff at all levels are prepared for evolving requirements.

Why Community Banks Need AI-Powered, Software-Based Risk Management

For community banks operating with lean teams and limited budgets, traditional, manual approaches to risk management often result in inefficiencies, blind spots, and delayed responses. To manage today’s expanding risk landscape, which includes cybersecurity and BSA/AML as well as fair lending and vendor oversight, community banks need modern, intelligent tools to centralize oversight and enhance decision-making.

AI-powered software-based solutions offer a more innovative way forward for community financial services banks. These systems automate workflows, flag emerging risks early, and eliminate repetitive tasks, freeing staff to focus on strategic priorities. With risks evolving in real time, adopting an integrated risk management platform is no longer optional for the best small business banks; it’s essential for resilience and long-term growth.

Predict360 Essentials: The Right-Sized Solution for Community Banks

Predict360 Essentials is purpose-built to meet the needs of community banks. The platform offers preloaded, standardized risk assessments for key areas, including BSA/AML, Cybersecurity, Fair Lending, and Vendor Risk, ensuring faster onboarding and immediate risk management.

Its real-time issues management dashboard provides centralized visibility across departments, helping banks respond proactively to emerging threats. With Kaia, the built-in AI assistant, institutions can automate controls, uncover insights, and enhance workflows. Plus, access to the Crowe Risk Library ensures banks leverage industry-leading risk content tailored to community banking.