| 90 percent of financial institutions suffer loss due to poor operational risk management A global survey of 400 risk managers at 300 financial institutions indicates that although operational risk management is moving up the priority list for financial institutions, the vast majority are still suffering annual losses incurred through poor operational risk management. The survey of corporate risk managers, the most comprehensive of its kind to date, was conducted by the Risk Waters Group and SAS, the business intelligence company. The results show that a fifth of all companies in the financial sector still do not have an operational risk management programme, despite the fact that 90 percent of them lose more than $10 million a year because of poor risk management. Even those companies that have put programmes in place are reluctant to invest the money for a framework, such as personnel and additional software functionalities, needed for it to work. 33 percent of the risk managers surveyed expect to spend $1 million dollars or less in improving operational risk management in 2003. "Despite the focus on compliance and the litigation that many financial organisations are facing because of poor risk management, many companies are at a loss to know what to do about this threat to their businesses," said Peyman Mestchian, head of risk management for SAS UK. "While new regulations such as Sarbanes-Oxley and Basel II have pushed risk management further up the agenda, expenditures - both in terms of systems and procedures and headcount - are still a fraction of what they should be." The survey also revealed that many companies have been slow to identify areas where their business is most at risk. IT systems failure was identified as a key concern by 47 percent of respondents, while less than a third were concerned about the company's ability to retain key employees. However, awareness of the potential losses involved through failure to manage operational risk has increased. Twenty-one percent of those surveyed said their company suffered losses between $10,000 and $100,000 at least once a day. Thirty five percent believe this could add up to as much as $120 million per year. For a summary of the survey results, please click here.
•Date:
9th September 2003 • Region: Worldwide •Type:
Article •Topic: Op.risk
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