OpRisk costs just keep rising

As the BBC reports today, another Euros1 billion in fines - https://www.bbc.co.uk/news/business-48292946

The management of risk and control data for financial institutions is a challenging task and since 2008, it has become increasingly complex given the emergence of new risks, new trading paradigms (algorithmic trading) and increased regulatory pressure targeting controls (GDPR, MIFIDII among many). Data is also proliferating.

Firms are wrestling with inconsistency and a lack of standardisation when describing, documenting and measuring key controls. They are concerned with missing key controls and duplication, and crucially, they are faced with the increasing cost of administering their control environment.

For all the time and money expended however, exposure to risk is not being sufficiently reduced. Uncatalogued risks continue to appear, resulting in increased fines from the regulators. The controls are not under control, and it’s costing firms billions every year.

Acutely aware that this money could be better employed elsewhere, the banks are under mounting pressure to resolve this issue.

Snapshot of the challenge...

￡26bn Annual regulatory cost since the 2008 crisis for top investment banks

$411bn OpRisk Capital for top 30 banks (tier 1 capital)

50,000 Average number of controls operated by global banks across their businesses

$190bn pa in gross losses

$100m+ Average cost per bank of operating risk and control

$375bn of fines incurred since 2012... make that $376bn