AN INTERESTING ARTICLE BY PATRICK JENKINS IN THE FINANCIAL TIMES THIS MORNING. THIS IS BY NO MEANS A NEW SUBJECT, INCREASED CORPORATE GOVERNANCE DRIVEN BY REPUTATIONAL DAMAGE, HOWEVER IT HIGHLIGHTS THE FURTHERED IMPORTANCE OF OPERATIONAL RISK MANAGEMENT AND HOW THIS COMES DOWN TO PEOPLE – OR EVEN “HUMAN ERROR”. WE HAVE SEEN A SIGNIFICANT INCREASE IN THE PRESENCE AND STATURE OF CROS IN FINANCIAL SERVICES OVER THE LAST FIVE YEARS (THE SAME IS HAPPENING WITHIN INTERNAL AUDIT AND COMPLIANCE).
There are some massive legacy issues within financial services and this article suggests that technology within banks has not kept up with the size and complexity of their operations (and therefore the associated risk). With insurers now less prepared to underwrite against miss-selling, for example, this results in significant pressure “to catch problems early … with better management of all kinds of risk”. This places greater importance on the risk professionals themselves and their ability to communicate effectively with all levels of an organisation. It will also see not just the CRO being elevated in stature but also their teams of experts, in this case operational risk. We are going to see continued competition for the really good risk professionals which will no doubt push salaries up further, but also increase the expectation now placed on these teams.
There is fundamental pressure on financial services and their corporate functions and we are certainly seeing these effects within the market, with many of our clients looking at Board level CRO appointments, furthered importance of operational risk management, increased reliance on compliance and more senior appointments where auditing corporate culture and conduct are concerned.
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