Operational Risk Management: A Diverse Role
In the past decade the financial industry has rapidly evolved leading to enhanced risk management practices. Operational risk is no different, as new and emerging risks enter the market it is often the strength of people, processes and systems which can enhance effective mitigation and management. However they can also pose a risk to businesses.
The role and scope of operational risk is more diverse than ever as many strive for sustainable and long-lasting solutions. For many individuals working within risk management they are often faced with the difficult task of staying ahead in a fast-paced industry. 2018 has highlighted the importance of operational risk within financial institutions as regulators placed heightened emphasis on the need for worthwhile risk management practices, and more recently a much larger push for resilience. In addition, risk management is appearing more within the public arena as consumers are displaying an increased demand for security.
In light of this the Center for Financial Professionals has conducted extensive primary research into industry trends, themes, opportunities and challenges surrounding operational risk. Through various surveys, interviews and meetings with leading industry professionals we aimed to identify the critical issues keeping risk professionals awake at night. In addition, we also explored the future outlook of operational risk and where the industry may be heading. Over the next three blogs we will share the top three areas produced from this research.
Undoubtedly one of the largest areas raised during research was the latest release of the operational resilience paper. Over the past several months many industry professionals have been reviewing the paper and identifying the key themes which must be implemented within the business. From the initial review it seems the regulators are placing increased emphasis on areas such as non-financial risk, technology risk and vendor risk management. It would seem that most professionals are concerned about the technicalities from the paper and moving from review to implementation. Below are some of the main comments produced from research:
“The operational resiliency paper has now been released, and so far we have all been reviewing it, but how do we move from reviewing to operationalizing it?”
“it seems operational resilience is covering lots of areas, you have technology, third parties, critical business services, security side, business continuity and contingency planning. The questions is how do you bring it all together to bring comfort to the board?”
“Now you have to operate in the market through market turbulence. And that relates to how you provide your services to your customers. If you rely on other people to provide your services then that’s a big part of your resilience capability”
“…what are your risks and tolerances if a service is down? it would be good if we could see some output and viewpoints on how the industry has approached the subject, what they found challenging and what they learnt from it.”
Read more about the second area highlighted in the research in the next blog – Vendor and Third-Party Risk Management.
To explore these this theme and more further the the 5th Annual New Generation Operational Risk: Europe on the 12-13 of March 2019 in London. ClusterSeven will be exhibiting at the Summit, www.cefpro.com/oprisk. Use code: OP-C7 to get 15% off the current rate.