The Financial Services Authority has published a review of operational risk management practices at 22 UK banks in a bid to help under-achieving firms improve their standards.
The FSA review comes ahead of new guidelines on operational risk management to be implemented by the UK regulator next year.
Clive Briault, director of prudential standards at the FSA, says: "Operational risk remains at an early stage of development, and although some firms have made substantial progress, many still need to think carefully about how to prepare for the FSA's new approach."
The main findings of the review demonstrated that more advanced firms had:
- established senior management commitment to the management of operational risk;
- integrated operational risk decisions into the business framework;
- used a building block approach to develop and then enhance their approach, learning as they went; and
- developed a clear internal focus for operational risk, often having a separate operational risk function to drive forward the programme.
Firms will need to comply with the FSA’s policy on systems and controls when they are introduced in September 2004. This final policy is due to be published in September 2003, although a draft framework was first issued in July 2002 and covered high level controls for operational risk.
To read the full ext of the FSA review, see: Building a framework for operational risk management