Regulation of Strategic Technology Risks

Patrick McConnell

This chapter will consider issues related to the regulation of strategic technology risks. It will examine the growing disquiet among financial regulators about the failure of large institutions to manage such risks and the disturbing fact that there is a lack of knowledge about IT issues at board level in many financial institutions. The chapter will also place the management of technology risks within the context of the Basel regulations on operational risk management (ORM), as well as describing some of the rules set by regulators on technology risk management in areas that impact the whole firm – such as outsourcing, BCP and information security.

REGULATORS’ CONCERNS ABOUT TECHNOLOGY

In January 2016, Andrew Tyrie MP, chairman of the influential UK Treasury Select Committee, wrote to the heads of regulation at the BOE and the FCA in obvious frustration at the recurring failures of IT systems in large UK banks:¹¹ For the correspondence between Andrew Tyrie and UK banking regulators on IT failures, see http://www.parliament.uk/business/committees/committees-a-z/commons-select/treasury-committee/news-parliament-2015/fca-hsbc-rbs-it-failures-16–17/.

The current situation