A torrid year

Welcome to the first issue of OpRisk & Compliance's 10th anniversary year. We'll be celebrating over the course of the coming 12 months in a variety of ways - in the magazine, with special events and with new online initiatives. To kick off, it seemed appropriate to focus on those who have helped operational risk grow and develop into the discipline it is today. We hope you will enjoy the profiles on the pages that follow!

It's rather appropriate that this year marks a decade of OpRisk & Compliance - given the increasingly large role that operational risk events are assuming in the continuing financial services sector crisis. The jokes about the Madoff investment fund fraud will keep the late-night television comics in material for some time, but I think most people within financial services acknowledge more frauds are likely to come to light in 2009, although hopefully not of quite that magnitude.

Certainly, I expect as this crisis continues to affect the 'real economy' in nations around the world, more frauds will be exposed, as well as system and controls failures, business risk issues, legal risk nightmares and regulatory risk migraines.

Operational risk executives can probably add the most value to their firms at the moment by identifying business lines or product areas that - for whatever reason - could be problematic. Think about it - what do you know about the managing director of mergers and acquisitions, or the seriousness of the staff cuts in custody? Who didn't take holiday at the end of the year - and why? Whose profits have been unusually fat over the past two years? Who keeps postponing investment in their information technology infrastructure?

While predictive tools for operational risk management are still in development, strong op risk executives who have developed robust informal networks and old-fashioned 'gut instinct' can probably identify four or five areas in their organisation that require further probing.

It's essential that operational risk executives do this - their firms must plunge into 2009 determined to get ahead of events. While 2008 was driven by a series of implosions as the sector rocked from one event to another, 2009 must see firms identify their potential weaknesses and deal with them aggressively in a preventative manner. Risk executives - and not just in operational risk but across the entire discipline - must seize the agenda and ensure senior management and the board navigate through this year with their eyes wide open.