Wolters Kluwer Financial Services Identifies Seven Top Concerns for Operational Risk Managers

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1 July 2014

Company's Subject Matter Experts Partner with Industry Leaders to Anticipate Operational Risk Trends

To help financial institutions better respond to upcoming regulatory and operational challenges, Wolters Kluwer Financial Services'leading subject matter experts have identified seven key risk management areas that organizations should pay the most attention to in the next 12 months.

Wolters Kluwer Financial Services compiled this information after attending several events designed for operational risk management professionals, including the OpRisk North America and Risk Management Association (RMA) conferences. During these events, Wolters Kluwer Financial Services' experts participated in a round of in-depth discussions with several top tier financial institutions to uncover emerging operational risk issues.

Listed below are the top current challenges that operational risk professionals are facing in today's financial services environment.

Seven Operational Risk Management Challenges:

  1. Risk Appetite Definition and Measurement: Many financial institutions are undergoing a transformation around how they measure and monitor risk at the highest levels.  Many have completed their Board-defined risk appetite statements and are now implementing programs for the measurement and communication of how well the organization is adhering to that appetite.
  2. Three Lines of Defense Reexamination and Organizational Structure: Largely driven by the heightened standards published in January 2014 by the Office of the Comptroller of the Currency, organizations are reexamining how their departments align and work together across the business to manage risk.  
  3. Regulatory Change Management: With the high volume of regulatory change at both the federal and local level, organizations are looking to have a more systematic and effective way to monitor and implement new regulatory developments.  
  4. Cyber Security: Cyber security is among the top priorities for operational risk mangers today, particularly in the areas of wire fraud and credit card/payments fraud.  
  5. Third Party Risk: Regulators are pushing organizations to monitor and manage the risk that their third party vendors represent. Improvements in this area include enhanced monitoring, increased due diligence and even Board level involvement in critical third party vendor decisions.  
  6. Data Quality: The Basel Risk Data Aggregation report released in January 2013 put data quality at the forefront of operational risk concerns with an emphasis on overall data quality and the integration of financial and non-financial risk.  
  7. Human Resources Risk and Staffing: With the high turnover in the risk and compliance disciplines, organizations are challenged to retain and recruit top talent.  Add to that the increased demand on these disciplines due to the six previous factors, and human resources risk represents a critical threat to organizations.

"Although financial services organizations continue to place greater emphasis on identifying and managing risk, new challenges continue to emerge, making it difficult to prepare for what's ahead," said Amy Downey, U.S. banking and regulatory expert, Wolters Kluwer Financial Services. "As financial institutions move forward, it is critical to pinpoint opportunities to improve the alignment of operational risk management with business strategy."