Operational Risk Panel at GARP
Gordon Burnes 270004HVEW firstname.lastname@example.org | | 0 Comments | 207 Visits
We had the opportunity to host a panel on operational risk at GARP this week in New York. The panel, “Using Operational Risk Management to Gain Competitive Edge”, included moderator Christopher Donohue, Managing Director, Research and Educational Programs, (GARP), and panelists Marcelo Cruz, Global Head of Operational Risk Management and Metrics, Morgan Stanley, Patrick McDermott, Senior Director, Enterprise Operational Risk, Freddie Mac, and Mairtin Brady, Head of Operational Risk Management, TIAA-CREF, as well as me, Gordon Burnes.
At the beginning of the the panel, McDermott outlined the basic set of questions that operational risk managers have to answer:
- What can go wrong?
This is a great way to frame the essence of an operational risk manager’s job, and those new to the discipline will do well to make sure that their program covers off on these fundamental questions.
This was an interesting panel in that each panelist represented a different perspective on managing operational risk programs. The starkest contrasts were between Cruz, representing the quants, and McDermott, representing the value and importance of qualitative information. Cruz took particular issue with scenario analysis but did acknowledge the limitations of models as expressed in confidence levels. It’s clear that there’s a wide range of practice in the industry on this topic, with some banks relying heavily on scenarios to model their capital, others relying more on internal data.
All panelist agreed that the operational risk function is on its ascendancy and is increasingly being brought to the table to weigh in on strategic matters, such as acquisitions or new product launches. One of the key takeaways was that operational risk information can help businesses better define their risk profile, allowing business managers to make better decisions about where to invest, and where to focus mitigation efforts.