Operational risk needs more resources, according to research

Although operational risk has moved up corporate agendas the resources to manage it have yet to be secured, according to new research by Ordnance Survey.

More than a third – 39% of those with UK responsibility and 42% with international responsibility – of the 50 senior risk specialists interviewed felt that their organisational risk management function does not currently have sufficient resources allocated to it, with 72% citing resources as the top issue they face in the coming 12 months.

It reveals that operational risk professionals are also battling with a lack of access to the important risk management data and support represented by increasingly sophisticated geographical information systems.

While over 60% say that geographical information is vital or important to their organisation, less than a third (28%) currently use geographic information in their role.

Sarah Adams, insurance and banking sector manager at Ordnance Survey, said: “The research shows that most operational risk professionals understand the importance of geographical data in risk management. Those that do use it see it as vital and use it primarily for disaster scenario and catastrophe modelling, fraud analysis and hotspot/pattern analysis. Fast access to comprehensive geographical information is critical to managing operational risks for the financial and banking sector. The fact that so many don’t have access to full information on the location of buildings, surrounding infrastructure and geographical fraud patterns is a real indicator that under-resourcing extends beyond people and budgets to information.”

Most operational risk managers predict that the top issues they face in the coming 12 months will be resources (72%), data and systems (66%) and budgets (44%).

It shows the most important elements of operational risk over the next year will be execution delivery and process management (90%), followed by business disruption and system failures (84%) and clients, products and business practice (80%).

Internal fraud and regulatory changes were seen as important by 64%, ahead of external fraud and financial risks.

Respondents with a UK only responsibility for organisational risk were slightly ahead of colleagues with responsibilities outside the UK in implementing Basel II recommendations.

Some 97%, for example, have an individual responsible for Operational Risk across the organisation, compared to 75% of those with international responsibilities.

However, nearly one in 10 (8%) does not have a comprehensive and independent risk management function under direct responsibility of senior management.

Ms Adams said: “It was clear in the research that a significant number of people were also dealing with issues arising from re-structuring or change management. It is important that boards do not get so distracted by internal responses to difficult trading circumstances that their Operational Risk teams are starved of the resources needed to comply fully with Basel II and continuing threats from areas such as climate change and financial crime.”