ORX Scenarios Strategic Roundtable 2024

In October, ORX Scenarios hosted a virtual Strategic Roundtable for the 89 institutions that took part in our 2024 Scenario Process Benchmark and Research Study. We were joined across two sessions by over 100 operational risk scenario practitioners from around the world to discuss the industry’s shared priorities for enhancing the end-to-end scenario process. Topics included portfolio coverage, scenario triggers, review and reassessment processes, integration, and governance.

The event was an opportunity to take stock of the findings of ORX’s largest ever scenario process benchmarking study (as set out in our recent State of the Industry Report and White Paper), reflect on recent advances in scenario process optimisation, consider the industry’s shared optimisation priorities, and explain how ORX plans to support these priorities over the next 12-24 months.

109

Participants

65

Institutions

7

Regions

Six key scenario process enhancement priorities

Both sessions kicked off with an overview of recent advances to make the scenario process more efficient and more aligned to new and evolving risk management uses of scenarios. The attention then turned to six current process enhancement priorities set out in our State of the Industry Report and White Paper – with three of these relating to aspects of portfolio coverage and maintenance and another three to scenario development and assessment. Collectively, we believe these priorities provide a platform for building an optimised scenario programme capable of supporting a dynamic and rapidly evolving risk management framework. Discussion of the six priorities was supported by contributions from subscriber institutions – we thank them for their input.

So, what are the six priorities we have identified for the future of an optimised scenario process?

1. Coverage

The first widely shared priority is to ensure the coverage provided by scenario portfolios is broader and more aligned to wider strategic objectives, requiring greater business input during scenario cycle planning. This includes giving greater consideration to emerging and resilience risks in annual plans as well as ensuring that portfolios are better capable of capturing risk interconnections. Current enhancements in this area include driving more collaborative planning across lines, risk processes and scenario programmes. Additionally, while there is currently little alignment across the industry in how best to govern identification and selection decisions, greater 1LOD input is a common aim shared by many.

2. Review

While review and reassessment procedures are becoming increasingly robust and supported by more data-driven evidence of change, many are now looking to make the process of reviewing portfolios and updating scenarios easier for the business to perform, more standardised and less resource intensive. This means leveraging the potential for light-touch refreshes that focus on relevant changes only and designing the right data standards, documentation and levels of oversight to support a more streamlined approach without impacting quality.

3. Triggers

While they remain a key priority for many, triggers are emerging as an area of practice where approaches, maturity levels and perceptions of their value and utility vary widely. A minority of institutions are working to optimise their trigger process with better metrics that are capable not just of driving more proactive change but of being more easily digitised and automated. However, most are focused on the fundamental task of designing and rolling out effective inventories of triggers associated either with individual scenarios or covering multiple scenarios. Whatever the level of maturity, there is consensus on the right steps for designing a trigger process and on the need to socialise trigger breach data more widely across risk processes – notwithstanding differing in views on how granular triggers need to be, how formal breach thresholds should be, and how frequently breaches need reviewing.

Taken together, these three priorities will be the focus of a dedicated ORX Scenarios workstream during 2025-2026 to:

• Conduct more in-depth process benchmarking on portfolio coverage and maintenance
• Develop a new ORX Trigger Inventory, with accompanying guidance on trigger design and implementation
• Provide good practice guidance on coverage, planning, review, and associated governance activities

4. Integration

While fully integrating scenario programmes that serve different purposes and regulatory outputs is not generally the end goal of efforts in this space, harmonising the right assessment steps across different programmes is a widely shared aim. This means making scenario development and assessment more consistent, more aligned across programmes, and supported by more standardised data. Many are focused on identifying tactical planning, data, workshopping, tooling and documentation efficiencies that will help alleviate the burden on the business and avoid duplication of effort, while also helping to improve quality and comprehensiveness and making it easier to tackle common strategic risk priorities.

5. Technology

Deploying and enhancing the right technology to optimise assessment execution continues to be a focus for most institutions. Here too, levels of maturity vary widely, from scenario portfolios integrated into wider systems supporting other risk processes and offering efficient data collection, analytics and visualisation capabilities to portfolios held on standalone platforms that remain relatively siloed from wider systems. However, common objectives include increasing scenario data quality, levels of workshop engagement, and process efficiency through digitised assessment tools, integrated databases, and workflow automation. This will require leveraging existing technological capabilities to make the process as engaging, efficient, reliable, cost effective and repeatable as possible.

6. Governance

Driving easier and more effective review, challenge and validation continues to be a challenge for many, as does embedding a more collaborative culture across lines of defence. Our study found that many are still working to make the oversight of assessment outcomes faster and easier and to build more efficient and more engaging governance models supported by a common understanding of roles and output quality. As scenario uses continue to evolve to support broader risk management outcomes, new models for better engaging the business and supporting the 1LOD through 2LOD-led initiatives to make development and assessment easier, more standardised, and more effective will be needed to save time and effort across both lines.

Taken together, these three priorities will be tackled in another dedicated workstream during 2025-2026 to:

• Conduct more in-depth process benchmarking on scenario development and assessment
• Develop a new ORX Risk Driver Inventory, with accompanying guidance on driver design and implementation
• Develop and provide good practice guidance on methodology, integration, systems support and automation, and associated governance activities

Read the full Scenarios State of the Industry White Paper to discover more. ORX Scenario subscribers get exclusive access to the report and accompanying documents here.