Risk for all organisations is a fundamental part of any business or operation whether it’s meant to be profit making or not. This is especially true of any financial services institute whether it is a matter of transacting in large amounts of assets or collateral or making profit from pro-actively managing risks. Every organisation operating in financial market has its own models by which it had managed it business in the past. The models the departments the analysts have all developed over generations to predict and manage the business and whilst many of these models are still relevant and perhaps even more so, with the change in regulation and compliance the interaction of the between the different areas has changed dramatically. Whereas before individual risk areas could operate as standalone islands of brilliance they now are being influenced by each under the umbrella of new models in operational risk. As instruments products or complete portfolio’s change in their structure, due to different factors many from outside of an organisation’s control, reporting systems both externally and internally need to reflect in real time the changes to the business. Meaning that Risk profiles and Capital requirements are known as they change and not at the end of any reporting period. The benefits to the organisations who manage to create such an infrastructure will also have a competitive advantage as not only will they be able to report in a timely manner to regulatory authorities but understand the key points of the business and able to allocate resources as needed or required. aSource Global as a boutique consultancy we focus on risk area’s that are relevant to the Financial Services Industry though with our senior executives we have a great deal of knowledge and experience that comes from a number of different sectors at the board level. Economic capital and risk-adjusted performance management Enterprise risk management and governance Liquidity risk Quantitative advisory services Actuarial risk
Broadly speaking you can classify Operational Risks as listed at the end of this article. Operational Risk is becoming more important and more recognised by regulators and directors as integrated with all aspects of a business and financial risks. Whilst in the past operational risk would have been seen as the implementation of Strategy and contributing to Strategic risk itself, the diminishing granular level of increasing responsibility for senior executives and officers means that operational risk management has become the framework for all aspects of a business. Many of the risks below are not just interrelated, they use the same DNA structures to deliver the risks that are identified and monitored. The issues and implications of increasing supervisor expectations are now that organisations with mature and long standing operations face huge change and challenge to organise the high level structure of their organisation. The tactical challenges range from understanding how to capture and store relevant operational risk information, to understanding, monitoring, reporting and tracking operational risk and compliance information required by your management and legal requirements such as Basel II and Sarbanes-Oxley. This includes information, assessments and preventative measures for major potential losses and reputational damage. It has become critical to be ahead of your competitors and regulators by being able to collect, process and disseminate critical information on controls, indicators and events throughout the enterprise. Without constant maintenance and updating, operational risk models and systems organisations will quickly fall behind and build up costs and risks that will far out weigh any cost saving.
Conduct Risk Behavioural Effects
As stated by the FCA culture change within firms is essential to restore trust and integrity to Industry. Firms’ behaviour, attitudes and motivations must be about good conduct; Consumers Firms and individuals must take responsibility for their part in creating markets which work well and offer a better outcome for consumers. Failure to adequately maintain the appropriate level of conduct not only exposes the organisation to regulatory fines/penalties, it also knocks its public reputation that ultimately affects Total Shareholder Returns…Read More
Market and Credit Risk
In today’s environment organisations need to manage Market and Credit Risk across the enterprise and across the books of both trading and banking. Events have shown that better decision-making across the front and middle helps improve profitability (or in some cases reduce losses) and maximise credit utilisation. It is critical that counterparty exposures and CVA metrics are understood in depth for both Basel compliance and to maximise returns within the frameworks that the regulations allow. For organisations to remain competitive they require efficient pricing of deals, that risk is understood and stress tested hedged effectively, and traders are remunerated appropriately so that profitable behaviours are rewarded and encouraged. aSource Global’s consultants are practitioners’ who able to create target operating models as well assisting in the integration of data systems across the enterprise.
- Organisation Legal and Compliance Culture Governance & Structure Communication Business/Operational Models Portfolio of Project Management Outsourcing Business continuity Security both Physical and Virtual
- Technology Communications IT Facilities IT Security
- Human Employee Direct and Indirect Employer Direct and Indirect Conflict of interest
- External Physical Litigation Fraud Internal and External
aSource Global can assist in all areas of operational risk whether in an individual subject matter or at the enterprise level.