Operational risk is a growing concern for many firms, says risk management expert Russell Walker. There are simply more areas where things can go awry, often with potentially devastating consequences for institutions, than ever before.
Operational risk refers to risk of losses that are not related to investment decisions, but rather to problems or failures of internal processes, employees and systems, or from external events. These range from human error to service delivery issues, injuries and accidents, theft and fraud, to regulatory risk.
Risk management expert Russell Walker will outline the operational risk challenges facing organizations and best practices for overcoming these at the Amsterdam Institute of Finance.
“There are more forms of risks, many of them in the cyber security space – for example, data-related breaches, or cyber-attacks”
Rusell Walker
“It’s a growing area. There are more forms of risks, many of them in the cyber security space – for example, data-related breaches, or cyber-attacks,” says Russell. Increased regulation, business complexity and the role of critical processes and systems also contribute to the increase in the scale and significance of operational risk.
“What we find is that companies that experience operational risk often go on to experience reputational risk,” says Russell. “There might be customer trust issues and lawsuits as a result. So it’s more complicated than simply that you didn’t follow a governmental procedure. The Volkswagen emission scandal is a good example of this.”
In 2015, the Environmental Protection Agency (EPA) in the United States found that Volkswagen had falsified emissions data from its vehicles in a push to sell diesel cars. In 2017, the car manufacturer was ordered to pay a criminal fine of $2.8 billion, cover the costs of recall of tens of thousands of vehicles, and deal with a massive loss of consumer trust globally.
On the flipside, institutions that are proactive in managing operational risk effectively can protect and strengthen the brand and the customers’ trust. “It is not just about avoiding or managing risk. There is room for creativity in this area,” says Russell. He maintains that risk management is a core competency that has potential to contribute to the growth of a company. His book Winning with Risk Management examines the principles and practice of risk management as a competitive advantage.
Russell will cover these and other related issues a two-day program Operational Risk at the Amsterdam Institute of Finance. The course will review best practices for financial risk management with special emphasis on its prevention and control. There’s significant focus on Basel III and the metrics and methodologies for operational risk measurement, and the Enterprise Risk Management (ERM) framework. Delegates will also learn more about the relationship between operational risk, regulation, and brand harm.
The program is relevant to regulatory and compliance executives and risk management executives. “Operational risk is an expanding part of risk management. Companies are still learning how to do this. For individuals, there’s a large opportunity for promotion and increase in visibility in the company. People who have taken this course have seen these benefits.”
Russell also offers a broader, intensive four-day program Risk Management – An Overview of Credit, Market, Operational, Enterprise, and Strategic Risk.