So the final Accord has now been published and we know that firms have to be ready at least in part by 31 December 2006. In the UK the Financial Services Authority has at last recognised that it should act in conjunction with other regulators rather than in advance of them.
Now is clearly the time for institutions to move forward in developing their operational risk frameworks. At Risk Reward Limited we are ready to deal with the issues that banks will confront on a daily basis and are available to provide assistance on a global basis.
At this stage what is crucial for an institution? Clearly by 31 December 2006 there is a requirement for three years of loss data – so the first year will be this year. It is much easier to collect the data whilst it is live than waiting until later and trying to extract the data from systems. Therefore we would recommend that banks start with understanding the loss data requirements and building their loss database.
Of course loss databases are only part of the problem. They can tell a firm about what has happened, but very little about what is likely to happen in the future. Risk Reward Limited can help firms with the thought process that will underpin their decisions over risk appetite, expected or unexpected loss and scenario analysis.
We work with your teams to develop the operational risk framework for your business and will continue to provide support for so long as we can be seen to be adding value. We know that the rules are going to change over time and will also be implemented locally. We can help firms navigate through the morass of information to achieve a value added operational risk framework