In the wake of the latest financial crisis, the failure to address and mitigate operational risk has led to some of the largest fines, settlements, and regulatory actions ever experienced by U.S. financial institutions. Unlike credit or liquidity risks which are confined to certain areas of practice within an institution, operational risk can impact every aspect of the business.
While operational risk is a much better understood concept today, with significant advances in tools and technology to monitor the risk, most institutions are still evolving in their approach to capture, communicate and manage this risk.
A few questions to consider on your path to managing operational risk might be:
- Are your internal systems able to handle sudden changes in operating conditions?
- Has your institution defined the level of acceptable operational risk in the risk appetite statement and metrics?
- Does your institution have a methodology to quantify and report the cost of operational risk failures?
- Have you modeled the institution’s exposure to operational risk and clearly identified its impact on capital?
- Is operational risk quantified for regular reporting to management and the board?
- Has clear accountability been established at the leadership levels and communicated within the organization for operational risks in the business model?
Analytic Focus has the tools and expertise to help you assess the level of risk and address the challenge of creating a robust operational risk control system. We can provide direction and assistance to your team in the assessment of key risks, evaluation of decision making processes, quantification of risks, and the implementation of risk controls.