Flag-waving (not wavering)


Until recently, I have often made note of the fact that many European jurisdictions – notably the UK and Germany, as well as Italy – have moved much more aggressively towards implementing the advanced measurement approach than the US. More than once, that nation's efforts have felt the sharp side of my keyboard.

Our recent OpRisk USA conference in New York, however, made me want to start waving the old stars 'n' stripes – I was so impressed with what the speakers had to say. For the US has leapfrogged Europe in operational risk, in some ways by leapfrogging over op risk. In the US, there is far less talk about the technicalities of the AMA, which has come to be associated with regulatory compliance to Basel II. Instead, the focus in the US is on enterprise-wide risk management.

In the US, many firms – the ones engaged in the concept of op risk – are moving beyond Basel II to create a new philosophy of business, which incorporates risk management into senior executive decision-making. I think this may perhaps be because the Basel II process is stalled at the moment – despite the release of the notice of proposed rulemaking, it will probably be deep into the fourth quarter of 2006 before we see the next substantial pronouncement on the subject from regulators. I think this has forced firms, who are committed to op risk, to think much more carefully about the reasons why they feel this is such an important programme to implement.

Back in Europe, at our OpRisk Europe event in London in early April, regulators, from Spain's José-María Roldán, to the UK's Rosemary Hilary were expounding on the importance of taking op risk beyond regulatory compliance and into the realm of business strategy and tactics. It's a theme the US Fed's Susan Schmidt Bies has been speaking on for some time.

And I think it is a theme that firms will have to adopt as their own in Europe – and in Asia. I'll be curious to see what the speakers have to say at our first annual OpRisk Asia event, which is being held in Singapore in July.

Operational risk makes sense – and it is not just about Basel II compliance, it is about fraud, and business continuity. It's about corporate governance and insider trading. And beyond those things, it's about using risk management analysis to make better business decisions. Who doesn't want to, at the end of the day, make more money, with less risk? OR&C

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