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Linkage between op risk measurement and management key, says Lawrence
Operational risk managers must face up to how they directly link op risk measurement to the process of op risk management, said Mark Lawrence, chief risk officer at ANZ Bank in Australia, today at the annual Operational Risk conference in London.
Lawrence said these factors demonstrated the difficulty of measuring operational risk. “It really is different from credit and market risk because there is this dependence on the quality of internal controls: are they there, are they robust, do they work? If they break down, how bad could the consequences be?" he queried.
Lawrence said ANZ had used the report to conduct an internal review by distilling down a dozen or so control failures, and assessing whether or not the bank also had the potential to experience those kinds of failures. "We took the results of that review to our board," he said. But, concluded Lawrence, the ultimate success or failure of the various methods proposed for measuring operational risk capital today will be determined by the strength of their connection to the operational risk management process. "This is the holy grail, the pot at the end of the rainbow,” Lawrence said.
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