Fresh approach to controls needed

Daily news headlines

LONDON – Following the significant fine imposed on Credit Suisse for controls failures and given the tougher stance the UK Financial Services Authority (FSA) is taking, specialist business and technology consultancy Detica has reiterated its call for the industry to refresh its approach to managing risk and controls.

Tony Clark, director of Detica’s investment banking unit, has stressed banks need to smarten up their act. “Any bank tempted to view penalties for regulatory malpractice as if they were parking tickets needs to think again,” he says. “The current regime at the FSA is clearly determined to crack down on irregular behaviour and, from now on, those found to be in breach of the rules might well start seeing themselves clamped or even towed away”.

According to Clark, investigations of recent instances of market abuse have highlighted the inadequacy of silo-based controls, which are further weakened by matrix reporting lines and a culture of deference towards the front office. Firms need to take a more holistic view of risk management to tackle this and other weaknesses in the traditional control model.

The challenge for banks is to supervise their multi-faceted operational environments effectively without over-burdening their operations with additional cost and complexity. Understanding the increasingly sophisticated nature of the instruments being traded is one element. This in turn is compounded by organisation structures characterised by matrix reporting lines that straddle product, functional and geographical silos.

”We are seeing increasing interest from the banking community in a framework that offers a resilient cross-silo approach to operational risk management,” says Clark.

Detica is testing its hypothesis at a major bank, where it is creating a holistic view of trader risk across the functional silos. “The challenge now is sourcing the data,” says Clark. “Data experts have long acknowledged the need to maintain more complete and accurate sources across organisations but their protestations often fall on deaf ears. We are now starting to see data quality rise to the top of the business agenda as management accepts that it is critical to building secure and resilient control environments.”

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Investment banks: the future of risk control

This Risk.net survey report explores the current state of risk controls in investment banks, the challenges of effective engagement across the three lines of defence, and the opportunity to develop a more dynamic approach to first-line risk control

Op risk outlook 2022: the legal perspective

Christoph Kurth, partner of the global financial institutions leadership team at Baker McKenzie, discusses the key themes emerging from Risk.net’s Top 10 op risks 2022 survey and how financial firms can better manage and mitigate the impact of…

Emerging trends in op risk

Karen Man, partner and member of the global financial institutions leadership team at Baker McKenzie, discusses emerging op risks in the wake of the Covid‑19 pandemic, a rise in cyber attacks, concerns around conduct and culture, and the complexities of…

Moving targets: the new rules of conduct risk

How are capital markets firms adapting their approaches to monitoring and managing conduct risk following the Covid‑19 pandemic? In a Risk.net webinar in association with NICE Actimize, the panel discusses changing regulatory requirements, the essentials…

Building resilience into ESG risk management

Risk and resilience continue to play an important role in the navigation of an increasingly uncertain world. Fusion Risk Management explores why it is equally crucial for technology to support organisations in addressing pertinent environmental, social…

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: