Quoted in the Wall Street Journal recently, "Canada’s top financial watchdog intends to press the big banks next year on how well prepared they are to deal with so-called “operational risk”–one of the most difficult risks to protect against."

We now know that operational risk is a major risk factor, a silent killer in its own way. It does not damage a limb, or an organ, it goes for the kill straight away.

One of the major pitfalls noted by the WSJ article is that Operational risk is likely to increase during times of recession. Banks and other organisations are cutting costs and reducing man power. This results in doing the same volume of tasks using a lower work force or doing it manually instead of spending on technology. This naturally increases risk significant as the probability of error increases.

Operational risk is broadly defined as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. It is a risk that is gaining significant attention.

Our advice, as risk management consultants, is that if you are cutting down on transaction processing expenses, then please do make sure you spend on better risk management practices in order to compensate for the imbalance.

Riskpro has unique offerings in operational risk management such as Risk Trainings, Compliance Check-lists, outsourcing risk management, risk dashboards, Risk Analytics, Risk Register etc. Please email manoj.jain@riskpro.in for more info.