By Hugo Ramirez, SVP, Director of Corporate Assurance, BBVA
What, for you, are the benefits of attending a conference like the ‘Operational Risk Management Congress’ and what have attendees learnt from your session?
Despite some of us in the financial industry may share the same Regulator (agency or even the actual agent), some institutions are made aware before others of new demands on this field (OR), uncovered probably while interacting with those Regulators in an almost daily fashion, or from unfortunate fresh outcomes of recent regulatory visitations.
A forum like the Operational Risk Management Congress offers a very handy conversation platform where the possibility to anticipate some of those additional risk management requirements increases, and to access to various notions on how to address those demands, and even more importantly, learning in some instances that those same resolution concepts could be indistinctively applicable to several industries.
While we may tend to believe that we know all possible ways to approach Operational Risk, it is always worthy to listen to other Groups and to add to our collective practical experiences with other professionals. I hope that I filled in some of those expectations during my own participation in the event.
You will be delivering a presentation on increasing accountability in the first line, why is it so important to the LoD model?
“A good beginning makes a good ending”, if our front-line and mid-line managers properly understand their role, this may inspire the other control layers to further support their efforts and to ensure proper Corporate Integrated Risk Management.
From time to time, the daily routine may cause an unintentional neglect of the first line of defense regarding its permanent obligation to be the primary front for Operational Risk management.
I truly believe it is the duty of all the “players involved” to help the first line of defense, which is increasingly sensitive to the involuntary deceleration of understanding the importance of their role in order to ensure the effective functioning of the model.
Why is it important to align control groups and ensure all are using a common language?
The importance lies in minimizing -hopefully eliminating- all possible misunderstandings and/or misinterpretations of concepts addressed during the delineation, implementation and execution of the enterprise-wide Operational Risk management efforts.
The ultimate goal is to ensure cautious employment of resources which ultimately translates into noticeable productivity.
What are the challenges of accountability for process mapping and internal control testing?
Defining proper risk management ownership and to ensure objectivity, avoiding likely conflict of interest during the execution of IC testing.
As an unwanted exercise, organizations tend to evaluate or repeat the same control tests performed by different Internal Control units without any distinctive added value. Those organizations may end up confusing the first line of defense with respect to what is really important to fix in the first place.
How can institutions leverage the 3 lines of defence model and minimise duplication of efforts across each line for one comprehensive program?
Expecting and encouraging adequate communication, disciplined coordination as well as professional commitment by all lines of defense.
I believe the time has come once and for all to understand that all lines pursue the same interest with different assignments, ultimately they share a common objective: To ensure that the organization navigates the terrain of risks in the most intelligent and eloquent way.
How do you see the future of operational risk evolving?
In a progressive and unstoppable digital transformation process for most industries, Operational Risk will demand improvement in the methods and speed of risk identification, management and mitigation.
I anticipate a new generation of Operational Risk professionals further their appreciation of Team-Work when coordinating Risk Management efforts, and I also anticipate “Data Analytics” remain a central focus of the related dialogues.