All change

One head of operational risk once told me that being a good manager of operational risk meant being able to manage change. In the current turbulent environment this skill is more relevant than ever. Change of any description within financial services firms has the potential to increase operational risk. Although this is something firms are aware of and try to prepare for, the torrent of new regulatory requirements is raising this risk exponentially.

With new rules potentially forcing banks to spin off entities, clear all trades through central counterparties (CCPs) or ring-fence retail deposits, the potential for operational risks to occur as a result of badly managed change processes is great. Nowhere is this seen more clearly than in the move for banks to push all derivatives through a CCP. Although clearing trades ultimately reduces the amount of operational risk, the process of implementing the technology and systems to do so will raise op risk exposure in the back office.

Managing change in an organisation involves keeping track of all the data firms collect, which supervisors ask to see on a regular basis. Having a holistic data management system is one way to keep on top of this. With this in mind, financial services firms are again waking up to the advantages of GRC platforms. Our market survey on compliance software shows half of all respondents had either implemented a GRC system or were in the process of doing so.

Implementing a GRC IT platform coupled with managing the accompanying culture shift in the organisation is a big task, and it has beaten many firms in the past. The fact GRC is once again gaining ground shows that the intense regulatory pressure is making it worth the effort and expense.

This will be my final editor’s letter for Operational Risk & Regulation as I am leaving Incisive Media. I have thoroughly enjoyed the past four-and-a-half years reporting on the people and news that make the world of operational risk, and will greatly miss it. However, I leave you in the very capable hands of the magazine’s new editor, Alexander Campbell, who has been working on Risk magazine for the past five years. I am confident ORR will continue to be the best place to look for must-have information on your market.

Best wishes.