How to Minimise ‘People Risk’

Ariane Chapelle

People, processes and systems form the building blocks of all internally generated operational risk, and “people risk” is often considered the largest risk of all. This is hard to argue with, but, 15 years into the development of operational risk management in the financial services, one could have expected more advances in people risk management.

Human resources functions and operational risk managers seem, in most cases, to ignore the similarities of their scope and, more so, the necessity of their alignment. The 2014 OpRisk benchmarking survey found that the operational risk function was formally involved in the discussions related to compensation and bonuses for only 19% of the respondents, and was not even consulted in 38% of cases. Similarly, only 27% of the organisations surveyed stated that operational risk limits were included in front-office compensation.

It is time both functions acknowledge the crucial role of proper HR risk management in every organisation and make use of each other’s talents and expertise. Thankfully, some organisations – and some enlightened HR managers – are acutely aware of their risk management role, rightly considering that managing

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