Operational Risk Priorities 2022

What’s on your agenda for 2022? Best practice Operational Risk forum comprised of practitioners from over 50 international financial services firms deliberated and ranked key priorities (graph above).

Continuing to embed robust risk management?

Not surprisingly, the?embedding?aspect of risk management, comprised of the first three priorities,??continues to rank highly. This has been the case consistently for the past decade, and?the theme appears repeatedly in articles, speeches and publications.?

E&Y survey in as early as 2014 revealed that?68% of respondents were strengthening accountability regarding risk roles and responsibilities, 58% - aligning compensation with risk-adjusted performance metrics.?In 2019, Andrea Enria, Chair of the Supervisory Board of the ECB, commented that ‘the journey is far from complete’ and ‘persistent and focused efforts are still needed to achieve a “permanent mindset change”.’

And so, Operational risk practitioners persevere in educating the business, firmly embedding risk management into employee goals and working on accountability for risk management becoming a norm within the first line. This comes hand in hand with increasing the ‘use test’ (priority 7), ensuring that risk tools truly aid in decision making.

Investing in risk analytics and enhancing tech capabilities

Data in general, and risk-related data, continues to pose a challenge to financial services firms. Organisations made strides to achieve digitalisation and enhance data quality, as acknowledged in the Basel committee 2020 progress report on the implementation of BCBS 239. This area will receive enhanced scrutiny, as ECB states in its 2022-2024 priority letter that it?‘will take focused initiatives to encourage banks to address persisting deficiencies in the area of digital transformation’.

Enhancing risk team capacity and capability?

2022 creates a positive outlook for risk practitioners. Best Practice Forum noted that risk recruitment in fact accelerated during the pandemic, with 45% of firms increasing the size of their risk teams.?74% remarked that the composition of the team has changed, with more focus on specialist roles.?The regulatory landscape influenced the hiring drive, with focus on hot topics such as cyber, resilience and third-party risk management.?The new entrant, ESG, also had an impact on recruitment, as noted by the?CeFPro 'ESG State of Play' survey of May 2022.??Overall, investing in risk teams, developing both the softer side of communication, influencing and relationship building, as well as the technical acumen, is the trend for 2022.

Being at the forefront of change agenda?

‘Nothing is permanent except change’; the quote attributed to Heraclitus, a philosopher famous for proclaiming that change is the essence of the universe. Financial services as an industry continues to be characterized by an enormous amount of transformation, driven by technological advancements and new regulation. Being at the forefront of the change agenda, facilitating Operational risk assessments of change initiatives is a key priority for 2022. This is an area where more focus is needed, as only some firms were confident with the robustness of their change risk assessment processes.

In Conclusion

Post-pandemic, risk teams are busier than ever. Continuing the journey of embedding while keeping a watchful eye on the control environment, a plethora of change initiatives and digitalisation, they march on orchestrating, reaching out, being visible and present; carrying out the leadership role.?

As John C. Maxwell, American author and coach said,?‘leadership is influence.’ Operational risk practitioners have been a great force, positively influencing the organisational risk culture and upping the standards of risk management.