About four years ago Causal Capital published a small presentation on Operational Risk titled “Op Risk Stories” that aimed to describe key advancements in operational risk management across the global banking sector. It was a balanced presentation in that it not only listed ten successful activities or risk management constructs that banks were trying to adopt, it also itemised ten stubborn constraints and hurdles that were reported as plaguing Operational Risk departments. I would argue that some of these obstacles are still open items looking for solutions today, but you need to take a look yourself to see which ones are plaguing your RM team, if at all. Overtime priorities do shift, and in 2019 there are new sources of concern, much of which originates from the regulatory corner itself.
You can find this presentation at the following [LINK], and the idea behind it was to capture key best practices that had been developed by leading RM teams in various financial institutions since 2002 and the introduction of Basel II.
Op Risk Stories | Martin Davies [LINK]
For a decade plus, the banking sector went through huge transitions, and operational risk matured. I would opinion further that at no other time across the non-chartered horizon of Operational Risk management has this management discipline evolved at such a pace. Indeed, the introduction of Global Risk standards of the likes of ISO 31000, just as one innocuous example, shows how empty risk management guidance can be outside banking circles. All that said, bankers have lost the plot too, and new regulations from the BCBS on SMA not only falls short, but they also unwind much of the excellent work that has been done over since Basel II was released.
We have to accept the Global Financial Crisis (GFC) has imposed huge demands on risk management teams or perhaps more so the reassignment of risk budgets to steal resources away from operational risk assessment and push institutions towards over-compliance. While operational risk was not at the causal centre of the GFC, it does appear to be impacted by the regulatory backlash as a result.
Anyway, if you take a look at the Op Risk Stories presentation, do ponder on how many of the winning practices and conundrums are still part of your risk management roadmap or more so as if maybe, what’s on the agenda for 2019.