Operational Risk Management: A Complete Guide to a Successful Operational Risk Framework

CHAPTER 17

Best Practices in Related Risk Management Activities

There are many activities within a firm that manage a specific operational risk or subset of operational risks. Each of these may have existed well before the operational risk corporate function was formed, and may be owned by specialists in that field. In addition to meeting all operational risk regulatory and business requirements, these risk areas often have their own unique regulations and business drivers.

As discussed in Chapter 16, the operational risk department must forge strong relationships with these areas in order to ensure the success of the framework and to ensure consistency in reporting and escalation of operational risks throughout the firm.

In this chapter, we will learn some more about each of these unique areas and their best practices.

NEW-PRODUCT APPROVAL

One of the most effective weapons against Clients, Products, and Business Practices events is a robust new-product approval process. This control should be designed to ensure that all risks are considered when a new product is being proposed. The market and credit risks may be well understood by those involved in proposing the new product, but they may be unaware of the resulting operational risks that may arise. Therefore, a new-product proposal should be reviewed by the legal, compliance, tax, information technology (IT), operations, and finance departments before it is approved. Each of these departments should carefully consider the possible ...