Have We Mastered Operational Risk Appetite?
In September, we took our popular Operational Risk Appetite Workshop to Manchester.
The workshop was hosted by Helen Pykhova, Director of the OpRisk Company, a practitioner with over 20 years’ experience in financial services and well-known in the industry as a respected Operational Risk trainer and former Director of the Institute of Operational Risk, responsible for the Institute’s Educational portfolio.
Helen began the session by presenting different perspectives on the nature of Operational risk; is it unavoidable, not revenue driven and therefore could only be mitigated downwards? Or, similarly to credit and market risk, can it be consciously taken in return for reward?
Participants proceeded to the live poll which revealed consensus, majority of attendees (92%) expressed the appetite using both qualitative and quantitative measures, while remaining 8% used qualitative metrics only. In terms of the tools used to express the appetite, Key Risk Indicators were ranked as the most suitable and effective, followed by Scenarios and Losses, while Risk and Control Self-Assessments were considered more of a day-to-day management tool.
The live poll also gathered views on how participants rated the following: operational risk appetite is linked to strategy; helps in decision making, drives behaviours and is communicated to staff. Most agreed that Operational Risk Appetite was in line with and linked to the strategy and was helpful in decision-making. Some felt that appetite promoted the right behaviours however attendees were less confident that it was communicated to and understood by staff (scored the lowest).
Guests worked together in groups to review various examples of Operational Risk Appetite Statements and had a go at drafting their own, before coming back together to share their thoughts and present their statement articulating its features.
This was a lively workshop with lots of discussion and there was a great mix of attendees with a wide range of experience, from financial and non-financial services. The group concluded that Operational Risk Appetite remains a hot topic for debate. We thank all our attendees for their engagement and input, making this first workshop a success.
I found the discussion very interesting and thought-provoking. Helen presented the subject well and clarified how operational risk appetite statements should be structured. Very well organised event and very informative – Chief Risk Officer