How do you manage operational risk in your bank?

When identifying operational risks take into account key business processes and services. Experience shows that process led identification (and assessment) of operational risks can provide additional benefits such as more effective business operations through reduced operational risk exposure.

Any risk that arises from ineffective process, external events, people and system disruption could be classified as Operational Risk, the further categorization could be established via approved Operational Risk Management Framework that should be based on BASEL guidelines pertaining to Operational Risk

Using tools such as risk maps, risk registers and scenario analysis to identify and evaluate potential risks. Imbed a risk system to automate workflow, monitor important KRIs and respond to oncoming risk events in real time and get alerts when risk indicators has crossed the threshold of acceptability. Generating automated reports with complete data to help leaders confidently make decisions about risks.

Identifying operational risks is a crucial step in effective risk management. Operational risks can encompass a wide range of issues, including process failures, human errors, technology glitches, and external factors. Remember to foster a culture of risk awareness where employees at all levels are encouraged to report potential risks. Make it clear that identifying risks is a collective responsibility. Form cross-functional teams to brainstorm and identify potential operational risks. Different perspectives can uncover risks that may not be apparent to a single department. is the first step towards effectively mitigating and managing them to safeguard your organization's operations and reputation.

Operational risk identification is an ongoing process, and it's important to involve key stakeholders across the organization to ensure a comprehensive understanding of potential risks.

Focus on key controls ie controls that if fail will materially increase risk exposure. This will help reduce the total number of key controls per risk and across the risk register as a whole. Make sure key controls align to those identified through other processes such as process mapping or audit. Having a manageable number of key controls can help strengthen the control environment overall.

Assessing operational risk is a critical component of effective risk management. Begin by identifying and documenting operational risks that are specific to your organization. These can include process failures, technology issues, human errors, and external threats. Evaluate the potential impact of each identified risk on your organization's operations, financial health, reputation, and compliance. Additionally, assess the likelihood of these risks occurring. Utilize risk assessment tools and methodologies, such as risk matrices or heat maps, to quantitatively or qualitatively assess the severity of each risk. Assign risk ratings based on impact and likelihood.

De mi experiencia en Bancos Privados y Públicos en Ecuador la gestión de riesgos operativos se fortalece cuando existe una sólida cultura de riesgos en la institución con el apoyo de la Alta dirección; acompañada de una adecuada y actualizada metodología de gestión de riesgos operativos donde se define el apetito de riesgo. Así también, fundamental el acompañamiento metodologíco a los gestores de riesgo en cada proceso dando principal atención a los procesos críticos, con el reporte periódico en los comités de riesgo donde se informa aquellos riesgos/eventos fuera del apetito y el reporte de avances de planes de acción.

There are many ways, tools and methods to identify, measure, monitor and manage operational risk. However in my professional life I found out that there is one requisite above all for well managing risk: risk culture. When risk culture is really imbedded in each person mindset and daily activity success stories appear. How do we do that? Through proximity, awareness and sharing. Regular meetings with our business correspondents to understand changes in processes, availability to help them out identifying and solving problems (vs mere reporting) regular awareness sessions were we try to demystify preconceived ideas about risks and controls. There is no tool that can beat a strong first line of defense.

Banks typically employ a combination of strategies, including: 1. Risk Assessment: Banks conduct comprehensive risk assessments to identify potential operational risks and their potential impact on the organization. 2. Risk Mitigation: Once risks are identified, banks implement measures to mitigate them. 3. Monitoring and Reporting: through various mechanisms, such as regular audits and reporting systems. 4. Training and Awareness: Banks invest in training programs to enhance employees' understanding of operational risks and promote a risk-aware culture throughout the organization. 5. Technology and Automation: Banks leverage technology and automation to streamline processes, reduce human error, and enhance operational efficiency.

Establishing a strong risk governance framework that clearly defines roles and responsibilities for managing operational risk. Promote a risk awareness culture throughout the organisation encouraging employees to report and address potential risk.

Analyse any identified risk or incident in return loop cycle where you capitalise on the lessons learned and implement what worked to mitigate the risk