Wednesday, August 11, 2004

Operational Risk Management Survey

A recent survey by Risk Waters Group and SAS shows difficulties in collating clean data and poor awareness among staff are the major obstacles to effective operational risk management.

The survey of more than 250 financial institutions and regulators identified managing data quality as the number one issue, with respondents reporting difficulties in collating sufficient volumes of historical data and in ensuring reliable data. The second most pressing issue was the poor overall awareness of operational risk issues by staff, due largely to lack of clear education programs in operational risk, lack of communication and limited knowledge sharing.

While the survey reveals progress over the past 12 months, there is still a lot to do. Operational risk is less well defined and potentially a greater challenge than credit and market risk. 19 percent of global respondents do not even have a program in place. This can be attributed to an organisation's size; institutions with an annual turnover of less than $100 million are most likely not to have a program.

Respondents quantifying the economic returns of a successful operational risk program revealed expected savings running into tens of millions of dollars annually for large financial institutions. On average respondents expect 17 percent reduction in loss. Order survey results