Financial institutions are failing to employ formal quantative analysis of operational risk or monitor key management/risk indicators, according to a survey by Raft International.
The risk technology vendor polled 143 institutions globally. Results of the survey show a majority of institutions undertake self assessment exercises and collect data relating to operational losses, but very few actually conduct data analysis.
A further key correlation is that while 62 per cent of respondents expect individual business units to carry the profit and loss impact of operational losses, only 45% allocate economic capital against such losses to their business units.
Mike Finlay, corporate development director at Raft International, comments: "The survey confirmed a number of issues which we hear every day in the market – financial institutions are addressing operational risk primarily to achieve best risk management practice and protect bottom-line performance, rather than for regulatory purposes."
He adds: "Most institutions are also in a transitionary phase at present, either designing and implementing their initial framework and approach, or reviewing their existing mechanisms in light of market developments."
The Raft results chime with a recent survey by the UK's Institute of Financial Services which found that almost a third of senior financial sector executives are not confident that they have access to reliable op risk data.