“It’s a relatively complex web.”
- Alex Toews, Director at Fusion Risk Management, discusses the evolving landscape of operational risk and its significance for financial resilience.
- Toews emphasizes the interconnectedness of financial and non-financial risks in the current risk landscape.
Impact of Fee-Based Activities on Operational Risk:
- Toews believes that recent re-lensing around fee-based activities as operational risks may not significantly change the working risk landscape.
- Some concerns are related to increased oversight and checks and balances, which some companies fear could slow down processes and lower business efficiency.
- Resilient organizations can adapt to regulatory changes and enhance oversight and control in fee-based activities.
Financial Institutions and Systemic Risks:
- Certain institutions, often called “too big to fail,” play a crucial role in the global financial system.
- The failure of such large institutions, as seen during the 2007-2008 financial crisis, has far-reaching and unsustainable impacts on the global economy.
- Avoiding systemic failures requires focusing on operational risk management, including the ability to operate effectively.
Operational Risk and Cybersecurity:
- Operational risk encompasses various factors, including the ability to transact, manage cash, and provide products and services to customers.
- Cybersecurity is a critical operational risk component, with cyber threats being a top concern.
- Emerging technologies like AI present new risks that must be addressed, making cybersecurity vigilance essential.
Understanding the Cohesion of Financial and Non-Financial Risks:
- Effective risk management involves understanding various operational processes’ relationships, requirements, and dependencies.
- Fusion Risk Management focuses on helping clients connect different risk domains and program areas to gain a cohesive understanding of pervasive risks.
- De-risking operations requires a comprehensive understanding of how a business operates financially and operationally.
- Financial resilience is closely tied to effective operational risk management in an evolving risk landscape.
- Understanding the interconnectedness of financial and non-financial risks is essential for avoiding disruptions and ensuring business continuity.
- Fusion Risk Management emphasizes the importance of comprehensively understanding how a business operates to enhance resilience and mitigate risks.
[Note: This summary captures critical points from the discussion with Alex Toews but does not cover the entire conversation.]