Live Blogging from RMA Global Conference on Operational Risk 2010
John Kelly 270004J7VQ firstname.lastname@example.org | | 0 Comments | 229 Visits
Against the backdrop of Copley Square, Boston on St. Patty’s Day, Yousef Valine, Executive Vice President at First Horizon described the need to focus on non-financial risk and particularly, operational and business risk. GCOR (Global Conference on Operational Risk) 2010 is the fourth annual event hosted by the RMA (Risk Management Association). In his keynote address, Mr. Valine stated that while most believe earnings volatility is a factor of financial risk, earnings volatility can be attributed to non-financial risk 30% of the time – operational risk (12%) and business risk (18%) – versus financial risk 70% of the time. The key message being that business managers need to be operational risk managers at heart and need to foster and facilitate a strong risk-aware culture.
Of course this makes the Madoff scandal at $65b even more troubling (note: Harry Markopolos will provide an in-depth review of the factors that enabled Madoff and how to prevent similar fraud in the future in his Keynote Address at OPUS 2010). Yousef emphasized that 45% of the loss amount ($19b) was the result of loss events in “Client Products and Business Practices” and that while it represented 45% of losses, the number of events (frequency) only represented 11% of total. Conversely, “Execution, Delivery and Process Management” represented 35% of frequency but only a fraction of the dollars lost. Ultimately, organizations need to consider severity versus frequency when reviewing loss events and mitigation practices.
Stay tuned for more from GCOR 2010.
Tags: GCOR 2010