Impact of digitisation on operational risk organisations

Patrick McConnell

Chapter 9 discusses the impact of digital money and operational resilience on ORM organisations, particularly how they would interact with other departments in the firm, especially IT departments, as processes become increasingly digitised.

OPERATIONAL RISK MANAGEMENT IS AT A CROSSROADS

The discipline¹¹ ORM is a discipline rather than a profession as there is no formal set of ethics governing the people involved and no agreed body of knowledge. of ORM is at a crossroads. Arising out of some serious banking incidents, such as the failure of Barings Bank in 1995 (Blacker and McConnell, 2015), the concept of attempting to proactively manage operational risks in finance, in addition to the traditional credit and market risks, was promoted in the early 2000s, mainly by regulators. The first sets of capital regulations aimed specifically at operational risk were promulgated by the BCBS (2001), and the first models of ORM practice were described in Risk Waters Group (2001).

One of the initial barriers to the development of ORM was the implicit assumption that operational risks were like credit risks and market risks in that ORM was essentially a quantitative discipline – and that loss models