Our strategic vision for operational and non-financial risk emphasises the need for a significant improvement in operational risk practices to keep up with the fast growth of digitalisation in the global financial sector. We see this as a unique opportunity to create value for both companies and their customers.
In collaboration with 50 senior risk leaders, including Heads of Operational Risk and Chief Risk Officers, we sought input on the need for a new vision for operational risk, publishing our findings in the white paper: Our strategic vision for operational and non-financial risk. The consensus among risk leaders is clear: the fast pace of business transformation necessitates an urgent and transformative approach to managing operational risk.
Key findings: Four areas of transformation
1. Digitalising the existing business
The digitalisation of existing business is, and has been, a priority for many firms. It has evolved from being a defensive move to counter the perceived threat of digital challengers to a table-stakes move to just stay in business. Operating at the speed and scale of a digital competitor – and with the same cost profile – is now expected
2. Creating new digital businesses
Digitalisation also makes it possible to create new businesses that are often focused on service- and fee-based business models. Firms create value from these by leveraging their brand, their data and their technology, and it is these new digital businesses that create the most new value.
3. A growing reliance on an ecosystem
Few institutions have the skills to change alone. To deliver these business transformations, firms have to rely on a tightly integrated ecosystem of partners and services providers. This goes beyond traditional third party relationships, to so-called “fourth party” relationships, where firms have little or no visibility on their suppliers’ suppliers. An ecosystem is significantly more complex than traditional networks, but it has become critical to success.
4. Increasing complexity and interconnectivity
All of this creates an increasingly complex environment characterised by the rapid creation of new interconnections within the business, across technologies and between players. The external environment is more volatile than any current industry leaders have experienced. We see economic volatility, political turmoil, technological disruption and changing societal consensus all affecting strategic business decisions. These aspects of transformation collectively create a challenging environment in which to manage risk. The ability to deliver change is now a strategic competitive advantage.
The opportunity for value creation
This is an opportunity to find value, with firms that are able to embrace change and manage risks strategically leading the way. The ability to manage operational risk effectively is not just about mitigating threats – it’s about seizing opportunities and creating sustainable value for both the firm and its customers.
Read Our strategic vision for operational and non-financial risk to find out how to help your firm transform for the future.
