FSA finds room for improvement in op risk practices

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LONDON – The FSA has published feedback after its thematic review of operational risk management practices, which assessed industry readiness for the Capital Requirements Directive.

Conducted between late 2006 and early 2007, the review assessed the op risk framework in 30 representative firms of various types and sizes, looking in particular at their governance framework, op risk resources, senior management review, policies, risk identification, assessment and reporting, loss data collection and analysis, and treatment of capital. The FSA found examples of good practice at a number of firms but found several areas in need of improvement, including analysis and reporting of collected information, embedding of op risk policies and firms' chosen methodologies, and the provision of adequate training.

Although the paper is not guidance from the FSA, it allows op risk managers to compare their practices with their peers and assess their readiness to meet the requirements of the FSA rules.

A full analysis of the feedback will appear in the December issue of OpRisk & Compliance.