Our new white paper highlights operational risk

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The regulatory landscape is changing. Basel III in particular will have a significant impact on all aspects of the banking sector. We are already seeing significant increases in both the quality and quantity of capital that is required to be set against the wider risks of running a business but the wider regulatory policies also seek to improve the underlying risk-management capabilities of banks, whether looking at Legal, Operational, Market, Regulatory or Credit Risks.

While supervisors everywhere are increasingly sensitive to the balance which has to be achieved between cost pressures and ensuring that banks take operational risk seriously, there is a major focus on avoiding the risk of “black swan” or “fat tail” events which could further jeopardize financial stability. Compliance and risk management are no longer simply a question of aligning with best practice through a team located somewhere in the institution. Risk appetite should be established and set at Board level, taking into account shareholder and regulators expectations. The concept of “enterprise risk management” is now well established.

This paper highlights some less considered elements of operational risk and demonstrates how a different approach can lead to real benefits to the business.

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This post originally ran on thomsonreuters.com.