People, systems and external events all generate operational risk. In the words of one Rogue trader “It’s sure to go up, trust me.” Whilst we’ve been focused on solvency and liquidity this just quietly ticks away – a sort of Cinderella of risk that from time-to-time bites. It makes you ask the question “just why didn’t we see this coming?” One of the difficulties is measurement. Subjectivity in terms of ranking and severity of loss inevitably apply. However a little more could be done to at least reduce the chance of mishap. One of the friction points is where systems and data meet people. This falls into three distinct headings:
Collection of information (integrity);
Working with information (processing;
The end result (output).
Nothing new here…..garbage in, garbage out but can anything improve? I think so. Whilst firms rely on experienced management a lot of day-to-day work is undertaken by less skilled operatives their objective being task completion. This needs to change and the simplest way to do this is to “sense check” things. This does of course rely on a basic understanding of what you are doing and its importance to the business. Failure by banks to provide employees with this basic skill is asking for trouble.
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