Mitigating operational risk is becoming a priority for banks that want to avoid penalties, reduce the likelihood of regulatory investigations and rebuild tarnished reputations. That’s prompting a step-change in the way operational risk is viewed and managed – moving away from a siloed, backward-looking approach, and towards a culture in which operational risk is managed proactively, strategically and on an organization-wide basis.
Ten years ago, if you looked at a UK bank’s financial statements, you wouldn’t see a lot of ink devoted to things like conduct risk or IT risk. In those days, operational risk was a relatively minor consideration – not something to be managed, calculated and disclosed in the same manner as credit and market risk. Very few institutions made a concerted organization-wide effort to identify areas of operational risk, understand its impact, or put in proactive measures to mitigate it.
But all that has changed. Today, a bank’s ability to understand and manage operational risk is a key factor for
commercial success – and the penalties for failing to manage it are growing in size and impact.
This paper looks at four trends driving an increased focus on operational risk. It explores the dangers for financial institutions that continue to manage operational risk in a siloed, ad-hoc and backward-looking manner. And it sets out the many benefits for institutions that can manage operational risk in a strategic way – and demonstrate convincingly that they are doing so.
Download Operational Risk in the Spotlight - Four Trends Making Operational Risk a Top Priority for Banks