Op risk moving to heart of management decision-making

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LONDON - Financial firms are starting to look at operational risk as a factor in management decision-making, according to a new report by business analyst Datamonitor. The paper says firms are seeing more proactive use for op risk management than as a reporting and compliance function.

The report, entitled 'From Compliance to Improved Business Performance through Operational Risk Management (ORM)', says operational performance is being improved by leveraging op risk reporting data, and that IT is expected to play an increased role in process monitoring and automated reporting.

"Against the backdrop of well-publicised instances of fraud, wider systematic risks and compliance changes post-crisis - it is certain there will be more stringent reporting requirements," says Damian Shaw-Williams, financial services technology senior analyst at Datamonitor and the report's author.

"In addition, regulators will become more prescriptive with management involvement in monitoring ongoing operations, as opposed to solely periodic reporting. Financial institutions have been spurred into appreciating the benefits arising from seeing op risk as the framework by which all other risks can be managed," says Shaw-Williams.