Digital Money: Operational Risks and the Threats to Operational Resilience
First published:
ISBN: 9781782724506
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Impact of digitisation on operational risk management
Introduction: Money is information on the move
Trends in digital money
How digital money creates new operational risks
Operational risk and cryptography
Operational risks of digital money
Commercial bank digital money
Private digital money, including cryptocurrencies
Public digital money, including CBDCs
Impact of digitisation on operational risk management
Impact of digitisation on operational risk organisations
Impact of digital money and operational resilience on ORM processes and people
Impact of digitisation on operational risk management in the future
Theory of money
Information theory
Classical cryptography
Modern cryptography
Conclusion
Acknowledgements
Appendix 1: Significant contributors to information theory and cryptography
Appendix 2: Timeline of significant contributions to information theory and cryptography
Appendix 3: Relevant information standards
Appendix 4: High-level risk registers
Bibliography
Chapter 8 describes the impact of regulatory initiatives, especially those concerned with the impact of operational resilience upon operational risk management (ORM). Digital money, although still emerging, has a complex relationship with operational resilience in that, as the name implies, systems that process digital money, especially IPS and CBDCs, must be highly resilient – operating 24/7/365 at the very highest levels of security and performance. The management of IT risks in digital money systems, and their associated operational risks, is critical to their success. The chapter first looks at operational risk management and the concept of operational resilience, before highlighting IT/ICT risks and considering new ORM regulations, in particular the EU’s DORA. Adoption of the concepts of operational resilience will, if taken seriously, have a significant impact on ORM functions and their operations, staffing and interactions with other business groups, which are covered in the remaining chapters of Part 4.
IMPACT OF DIGITAL MONEY ON OPERATIONAL RISK MANAGEMENT
Finance is fundamentally about credit and is inextricably tied to money, mainly as a unit of account and medium of
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