Operational Risk Management (‘ORM’) is somewhat of an in-demand discipline with a shortage of skilled professionals according to the Robert Half Salary Guide. Born in the 1990s as a result of the Basel Committee’s decision to integrate operational risk into regulatory capital evaluations, ORM continues to evolve with the ongoing modernisation of the financial industry. Once considered a regulatory box-checking department, the ORM teams of the future are likely to be far more influential and critical to product and business development than ever before.
The evolution of Operational Risk Management
As part of the large scale culture change in Banking since 2008, risk management has never been more integral to the business of banking than it is now. But often overlooked is the role that ORM plays in not only helping to reduce losses but also to improve business performance.
Let’s not forget that many of the huge losses suffered during the global financial crisis itself were caused by operational failures like the misguided evaluation of subprime assets, inadequate IT systems and the systemic operational focus on innovation and short term goals, without proper consideration for long-term consequences.
The introduction of controls like Basel II, Basel III, regulations like BCBS 239 changing regulation and the growing focus on economic and regulatory capital have helped to provide balance. In turn this has ensured that ORM is given the priority status it needs in order to provide confidence to regulators, customers and shareholders.
The resulting increase in reporting and accountability from the likes of the ‘Senior Managers Regime’ to senior management and the board of directors has taken ORM from low profile, reactive measurers of risk to high-profile, pro-active identifiers of it. The ORM teams of today now have a clear and influential input on new products and initiatives.
The link between Operational Risk Management and business performance
The value of ORM as a discipline is growing. Banks are recognising that ORM teams can provide much more value. Input from ORM is being used to actually drive product innovation and gain commercial advantage over competitors through strategic insight.
As a result, the link between business performance and ORM is growing. The more business-orientated ORM of the future will not only protect the business and reduce operational losses, but will also be integrated with the rest of the business. A higher profile of risk means it won’t simply serve to ensure businesses comply with regulations but will be a key influencer in shaping the future of the financial industry.
As forward-thinking ORM functions become more sophisticated, the spotlight is moving from the sheer quantity of risk management processes to more quality risk management schemes which can show that they are adding real bottom-line value to the business. It’s no surprise then that operation risk management professionals were found to be in high demand in the Robert Half Salary Guide. As companies look to find greater efficiencies and improve their place in the market, it is evident, now more than ever before that high calibre ORM candidates are key to businesses success.