Positive Risk Management

Foreword

This article is the second of a series in which I share my review of a list of 12 Risk Management books that I have announced early 2019 here. The views expressed here are my own and do not necessarily reflect the views of past employers, clients or organizations. These are influenced by my experience (working mostly in financial services). In the present case, my views may also be biased by the fact that although I read the book in February, I wrote this review after I started collaborating professionally with its author, Ariane Chapelle, since April 2019. I therefore invite you to read the book, should you want to make your own opinion. To get a first flavor, the identification and first chapter (Risk Identification) are available for free on Chapelle Consulting website: https://www.chapelleconsulting.com

The Book

? Operational Risk Management: Best Practices in the Financial Services Industry ?, by Ariane Chapelle, was issued just 1 year ago, in December 2018.

Ariane Chapelle has a PhD in Economics and has been active in operational risk management since 2000, and is a former head of operational risk management at ING Group and Lloyds Group. She is Associate Professor (Honorary Reader) at University College London for the course ‘Operational Risk Measurement in the Financial Services’ and is a Fellow of the Institute of Operational Risk and a trainer for the Professional Risk Managers’ International Association (PRMIA), for whom she designed the Certificate of Learning and Practice in Advanced Operational Risk Management. She runs her own training and consulting practice in risk management.

Her book is made of 5 parts, whose:

·      first 4 parts will talk to any risk manager, since they cover the 4 classical phases of risk management (identification, assessment, mitigation, monitoring), albeit these are being seen from an organization-wide perspective rather than from an individual risk viewpoint only;

·      a fifth and last part dedicated to “Rising Operational Risks”, in which the author addresses topics currently high on the agenda, from project risk management and information security risks to operational risks in cryptocurrencies. 

The last chapter of each part is focused on advanced tools & techniques used by the most mature firms in ORM, covering the following themes: risk connectivity and networks, regulatory capital and modeling, conduct and culture, valuable ORM, resilience and reputation.

My Review

Ariane Chapelle’s book is first and foremost a pragmatic and enthusiastic book.

Building upon her then-17 years of academic and practitioner experience in the field, it reflects her rich dual experience, by providing both the indispensable theory of risk management and the concrete examples of best practices, helping the reader to easily understand the exposed concepts.

This is done is simple terms, by way of short yet incisive chapters of 10 to 15 pages in which Ariane succeeds in stripping Operational Risk Management down to the essentials while giving it some appeal from the sometimes considered (and often with reason) “boring” theory that often worked against Operational Risk Managers in financial services for many years.

The book is filled with numerous concrete figures, tables and not less than 25 case studies (building upon her own experience as a trainer and adviser), that are selflessly offered to the reader, Ariane Chapelle distilling her advices on what to do/not to do in an open and genuine style.

Provided examples form the ideal basis for readers willing to benchmark their organization and determine how they compare with what Ariane has experienced and researched as being the best practices in the field. 

The whole book reflects her vision for Risk Management, “Positive Risk Management” which is “about capturing information on success stories as well as losses, about discovering why some people, departments or firms are positive outliers and exceptionally good at what they do”.

Simple, concrete and comprehensive, this book has got all needed ingredients to become your reference book to help you doing a better job at practicing Operational Risk Management and promoting its value to the rest of your organization. Clear and to the point, it provides a solid foundation to baseline or refresh your knowledge, and constitutes an ideal start to dig further on any of the OpRisk topics, thanks to the many other interesting books she refers to (this includes the “Failure of Risk Management”, by Douglas Hubbard, that I reviewed in more details in 3 previous articles, starting here), in her chapter dedicated to the demonstration of the value of risk management.

While it will probably be mostly of interest to Operational Risk practitioners (in any of the 3 lines of defense of a financial firm), it is also well suited for any business leaders willing to give the attention it deserves to the increasingly important field of Operational Risk, which in these turbulent times for the financial sector, can of course break but maybe more importantly, make a bank.

To summarize, it’s a book to put in everyone’s hands (including my daughter’s).

I hope you’ll enjoy it as I did - and still do, since it’s definitively not a one-time read-.