5 Key Trends for Operational Risk in 2018: Driving Value in a Changing World

  • Subscribe to updates

  • Privacy
  • This field is for validation purposes and should be left unchanged.

Operational risk has always been different. Almost from that start, the financial services industry worked with regulators in an unprecedented collaboration.

They came together to create a framework that helped firms improve their operational performance and risk management – as well as make the financial system safer and sounder. Helping firms deliver more business value has always sat at the heart of the operational risk discipline.

This year, in September 2018, marks two decades since the Basel Committee on Banking Supervision released its first paper on operational risk. While the discipline has seen its share of swings and roundabouts, it’s clear that operational risk is poised for another period of accelerated evolution.

RiskLogix has identified five key trends that – as they come together – will refocus attention and resources on the discipline.

These 5 key trends for operational risk are:

  1. Increasing personal responsibility under the UK regulatory system – The advent of the Senior Managers Responsibility and Certification Regime (SM&CR) is refocusing attention on loss prevention as senior executives seek to limit their personal exposure.
  2.  Requiring an integrated view of operational risk across the enterprise to eliminate geographic and regulatory silos – The financial services business was never more global, but especially since the Financial Crisis, regulation has never been more siloed – and firms are struggling to keep up.
  3. Evolving view of losses by the board and senior management – Another outcome of the Financial Crisis reforms is slimmer profits, as so-called casino banking operations are jettisoned – giving op risk losses enhanced impact on the P&L. This translates into increased visibility at the board level.
  4. Deepening engagement between the business and operational risk management – These three trends are incentivizing senior executives to seek out the business value that a good op risk program can provide.
  5. Accelerating velocity within the practice of operational risk measurement and management – The faster pace of business, as well as increasing regulatory demands, mean that to deliver risk intelligence, op risk must be nimbler.

To be able to step up on all five of these trends, operational risk teams need to have tools that will enable them to deliver the robust analysis that senior managers and boards need to make risk-informed decisions. This includes choices around risk appetite, control and resource allocation, the impact of regulatory change, investment choices, and analysis of industry and competitor trends.

Artificial Intelligence (AI) solutions that can deliver real risk intelligence may make the difference between an op risk team that is able to provide real value to its organization, and one that cannot. It is simply not possible for financial services firms today to tackle the five trends identified in this whitepaper using spreadsheets. As well, regulators are starting to say openly that they regard firms who attempt to do op risk on a spreadsheet as having a much less robust approach than a firm which has dedicated operational risk management software, or a risk-centric GRC solution.

In conclusion, today’s op risk teams need to better understand the trends that will be shaping their operating environment over the next two years – and prepare to tackle challenges head-on.

Free whitepaper download
A Time of Change – 5 Key Trends Shaping Operational Risk Over the Next 2 Years 

To find out more about the trends that will impact operational risk over the next few years, download our free whitepaper.

Related Posts

Embedding and Entrenching Operational Risk Management
One of the most difficult things that a Chief Risk Officer (and the Head of Operational Risk Management) has to do is embed and entrench operational risk management. By contrast, implementing operational risk management is straightforward although a task that can take several years. It is also easy for a regulator to spot a firm …

Embedding and Entrenching Operational Risk Management Read More »

The Shortcuts Trap – Rethinking Reporting
How speed can be the enemy of usefulness when it comes to reporting This is the last in a series of four blogs about the ways in which common shortcuts can undermine core operational risk elements within financial services firms…..more to come You can view the other blogs here:The Shortcuts Trap – Loss Events ReconsideredThe …

The Shortcuts Trap – Rethinking Reporting Read More »

Loss data – Driving business value from operational risk data
In most financial services organizations, operational risk data is underused. Vast amounts of operational risk data – including operational risk loss event data – is often collected but are not transformed into meaningful reports for key stakeholders. As a result, the business, senior management, and the board can often question just how much real business …

Loss data – Driving business value from operational risk data Read More »

Client Area Access

Sign in with

Your company email address is required to register.

  • Name

  • Contact Info

Sign in with

Please enter your username or email address.
You will receive a link to create a new password via email.

You must be logged in to edit your profile.