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.
Bankers hope EBA op risk taxonomy will go global
Proposed update to 20-year-old risk map is welcomed, but international co-ordination urged
How is risk culture conceptualized in organizations? The pan-industry risk culture (PIRC) model
This paper puts forward a pan-industry risk culture as a framework through which to proactively manage risk culture.
NatWest, StanChart, Nationwide drive record op RWAs at UK banks
BoE data shows operational risk RWAs highest going back to 2014
Natural language processing-based detection of systematic anomalies among the narratives of consumer complaints
The authors develop a means to detect nonmeritorious consumer complaints using natural language processing.
Do government audits raise the risk awareness of management? An investigation from the perspective of cost variability
The authors investigate the impact of government audits on state-owned enterprises, finding they increase cost variability in these enterprises.
Integrating internal and external loss data via an equivalence principle
The authors put forward a means address data scarcity in operational risk modelling by supplementing internal loss data with external loss data.
On geopolitical risk, G-Sibs choose their battles
Conflicts – both existing and threatened – raise concern among banks, but many are still grappling to weave the risk into their frameworks
CrowdStrike outage spurs rethink on ‘critical’ vendors
Some want US regulators to designate tech firms that pose risks to financial stability
Déjà vu for common domain model
Piecemeal progress on ambitious derivatives data standard raises questions over business case
Between the lines: why banks are rethinking risk management
Lloyds is not the only bank wanting to reshuffle the three lines of defence as tech risks grow
For G-Sibs managing cyber outages, confidence makes the difference
IT disruption drops among top G-Sib concerns this year, as banks revamp models and retool risk indicators
Consolidating risk management and compliance silos in financial services
This white paper explores the key challenges and priorities for firms looking to unify risk management and compliance applications via a single enterprise-wide platform
Insurers deny cyber premiums are rising
Contrary to banks’ complaints, underwriters and brokers claim current market for policies is soft
Derivatives trading halved amid CrowdStrike tech outage
With broker screens offline, G3 rates derivatives volumes plunged versus a normal Friday
Op Risk Benchmarking 2024: the G-Sibs
Eleven large banks feature in round II, with new data points on first-line risk teams, taxonomies and AI adoption
Cyber insurance costs still rising, say big banks
Op Risk Benchmarking: Cost of covering same exposure as last year now “somewhat” or “significantly” higher
Op risk data: UBS takes a giant Greensill pill
Also: Nasdaq insider trading rap; Trafigura travesty; further Citi fat-finger fail. Data by ORX News
Does Basel’s internal loss multiplier add up?
As US agencies mull capital reforms, one regulator questions past losses as an indicator of future op risk
Banks must break data silos to improve pricing decisions
Data consistency is increasingly key to judging risk and reacting quickly in a crisis, writes former XVA practitioner
US election a ‘classic inflection point’ – Rory Stewart
Risk Live: Podcaster and former politician talks geopolitical risk and UK politics in keynote speech
AI hack threat forcing banks to review cyber controls
Risk Live: AI lowers barriers to entry for phishing, say firms; more common controls needed
Op risk managers say models will survive phase-out of AMA
Risk Live: Supervisory focus expected to shift to Pillar 2 capital, and ILM may make a comeback in Europe
Bank of America’s Kris Fador elected FS-ISAC board chair
Industry consortium for cyber security also adds new board directors from Swift, PNC, Truist and CME
Op risk data: Japan’s giant bitcoin break-in makes a monster loss
Also: Citi’s fat-finger fallout; HSBC pays for unfair customer treatment; Visa and Mastercard fined over ATM fee-fixing. Data by ORX News