Future of Risk and Compliance for FI Summit

Technological upgrades in the financial sector
New forces are creating new demands for operational risk management in financial services. Disruptive technology has increased the availability of data, and new business models and value chains are changing the way banks serve customers, interact with third parties, and operate internally. Legacy processes and controls need to be updated from the start, but banks may also see the urgency for change as an opportunity for improvement. The adoption of new technologies and the use of further data can improve operational risk management itself.

Now risk management is more centralized, implemented with greater efficiency, and truly integrated into business decision-making. The benefits to financial services firms of doing so are enormous. For now, efforts to address new challenges are having a measurable impact on outcomes. Read more

Internal challenges
Although banks have come a long way, managing operational risk remains challenging for several reasons. Compared to financial risks such as credit risk or market risk, operational risk is more complex, involving dozens of different types of risk. Second, operational risk management requires monitoring and transparency of most organizational processes and business activities. Third, separate definitions of the roles of the operational risk function and other oversight groups, in particular compliance, financial crime, cyber risk, and IT risk, have become flexible. Finally, until recently,

operational risk was more difficult to measure, manage, and recognize constraints than financial risk. This last restriction has been lifted in recent years: detailed data and metrics on business processes, employee performance, customer feedback, and other sources of information are now disseminated. Read more

Defining Next-Generation Operational Risk Management
The operational risk discipline must evolve into a mandate that must expand to include second-line monitoring to support operational excellence and resiliency. Business processes, analysis-based problem detection, and real-time risk reporting should replace manual risk assessments; talent needs to be realigned as digitization and data and analytics advances roll out; banks will need experts to manage specific types of risks such as cyber, fraud, and risk behavior; and human factor risks will need to be

monitored and assessed, including those related to misconduct (such as sexual harassment) and diversity and inclusion. This will require adopting more flexible working methods with greater use of interdisciplinary teams that can respond quickly to problems, near-misses, and risks. or emerging threat to resilience. Read more