Operational risk
WHAT IS THIS? Operational risks are those arising from people, processes and systems – the biggest form of exposure for many industries, but one that was neglected by financial firms until the collapse of Barings Bank in 1995. It was added to the Basel capital framework in 2004, but attempts to model operational risk were dealt a heavy blow by the huge, unforeseen losses suffered by banks in the aftermath of the financial crisis.
Start planning for post-quantum risks now
Next-gen quantum computers will require all financial firms to replace the cryptography that underpins cyber defences, writes fintech expert
Operational risk modeling under the loss distribution approach: estimation of operational risk capital by business line versus risk category
The authors apply the loss distribution approach to operational risk data, contributing to understandings of the composition and distribution of operational risk data across risk classes and the corresponding operational risk capital requirements
BoE warns over risk of system-wide cyber attack
Senior policy official Carolyn Wilkins also expresses concern over global fragmentation of bank regulation
Operational risk and non-life insurers’ performance
The authors assess operational risk in the non-life-insurance sector, finding operational lapses and the cost–income ratio to have negative effects on premium growth and financial performance.
Op risk data: Mastercard schooled in £200m class action
Also: Mitsubishi copper crunch, TD tops 2024 op risk loss table. Data by ORX News
Operational risks: trends and challenges
The authors carry out a systematic literature review of operational risk research to determine the current state of operational risk research in financial institutions.
TD Bank’s annual op loss tab surges 144% amid AML settlement
US plea deal drives bank’s op RWAs to record C$120 billion
Determination of the fraction of losses and their probabilities by type of risk and business line from aggregate loss data
This paper proposes a novel means to derive the individual loss severities and the frequency of these losses per business line and risk type.
SGX suffered five-hour op failure from CrowdStrike outage
First major service disruption at CCP’s Central Depository service in nine years
On resilience risk, banks prepare to let the bad times roll
Lenders bolster first-line teams and upskill boards as compliance with new rules bites
The path to operational resilience begins with reliability and risk management
The challenges Apac financial services firms face enhancing operational resilience and leveraging data and hybrid cloud
FX automation key to post-T+1 success, say custodians
Custody banks saw uptick in demand for automated FX execution to tackle T+1 challenges
For banks, change risk is inevitable; managing it, optional
Regional bank survey shows steady growth of dedicated change risk functions and adoption of leading indicators
Review of 2024: as markets took a breather, firms switched focus
In the absence of major crises and rules deadlines, financial firms revamped strategy, services and practices
As supplier risk grows, banks check their third-party guest lists
Dora forces rethink of KRI and appetite frameworks amid reappraisal of what constitutes a key counterparty
Dora flood pitches banks against vendors
Firms ask vendors for late addendums sometimes unrelated to resiliency, requiring renegotiation
Op risk data: Santander in car crash of motor-finance fail
Also: Macquarie fined for fake metals trade flaws, Metro makes AML misses, and Invesco red-faced over greenwashing. Data by ORX News
Public enemy number one: the threat to information security
Nearly half of domestic and regional banks report risk appetite breaches amid heightened sense of insecurity
Op Risk Benchmarking 2024: the banks
As threats grow and regulators bore down, focus shifts to the first line
Fed stress-testing operational readiness of discount window
Experts say consultation on improved ops should be accompanied by focus on willingness to borrow
CFTC weighs third-party risk rules for CCPs
Clearing houses could be required to formally identify and monitor critical vendors