Reflections on OpRisk Management
First published:
ISBN: 9781782723493
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Operational Risk in Four Letters
Operational Risk in Four Letters
Introduction
Operational Risk in Four Letters
An Invisible Framework
Small is Beautiful in OpRisk Management
The Business Value of ORM
How to Minimise ‘People Risk’
The Missing Piece
Risk Appetite and Framework
From Russian Roulette to Overcautious Decision-making
The Importance of Preventive KRIs
How to Build Preventive Key Risk Indicators
Unlocking KRIs
Six Steps for Preventive KRIs
Have Your Cake and Eat It
Conduct, Not ‘Conduct Risk’
How to Manage Incentives
Is Reputation Risk Overstated?
What Regulators Want
Conduct & Culture
OpRisk Takes Forward Steps at OpRisk Europe 2014
Modern Scenario Analysis
The Rogue’s Path
Rogue Trading No Training: The Connections
What Brexit Teaches OpRisk
OpRisk Survey Shows the Insidious Effects of Political Risk
Discarding the AMA Could Become a Source of OpRisk
UCL Research Shows that SMA Reforms Introduces Capital Instability and Discourages Risk Management
Memo to Bank CEOs: Treat OpRisk with More Respect
Don’t Let the SMA Kill OpRisk Modelling
Sometimes it’s good to go back to basics. Every operational risk manager knows the Basel Committee on Banking Supervision’s definition of op risk: “The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.” That’s PPSE for short.
After 15 years of frameworks, lines of defence, risk and control self-assessments, aggregated dashboards and tools of every kind, risk managers in the financial services industry would benefit from going back to the fundamentals of op risk: what it really is and how it is generated.
I would argue that organisations that get the fundamental performance drivers of PPSE right are much less prone to large operational failures than others. Firms that dedicate enough care to the performance management of PPSE components mitigate – implicitly or explicitly – the key factors of operational risk and achieve operational excellence.
Table 1.1 presents some of the biggest drivers of operational performance using a PPSE approach. It also highlights the relevant areas of scientific research, which is still underused in the financial services sector.
A PPSE view of op risk management has different
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