Operational risk management in times of crisis

What it is about

Operational risk management in times of crisis, in collaboration with Némesis and the Spanish Risk Management Club, with perspectives on operational risk management in institutions.

The speakers are Rosa Damaris Díaz Gómez, a systems engineer with 24 years at the Superintendency of Banks, now head of the Operational Risk Division of the Risk Management and Studies Department and president of ISACA Santo Domingo, and Alejandro Franco Hidalgo, of BBVA (Spain and Portugal Engineering), a specialist in risk strategy and development, finance and corporate systems.

Session summary

The first speaker, from the Superintendency of Banks, reviews how the pandemic changed operational risk: remote work, accelerated digital transformation, new services (such as home delivery and telemedicine), more internal and external fraud, errors in improvised processes and pressure on technology, on top of the hurricane season. She recalls that a pre-pandemic risk matrix no longer works, that risk can also open opportunities, and that the operational risk manager must help the first line to identify, monitor and quantify losses and assess how they affect regulatory capital. She points to the Dominican regulations on operational risk and outsourcing.

The second speaker, from a Spanish bank, compares past operational-risk cases (the fraudulent trader, the pyramid scheme and a cybersecurity failure that nearly wiped out a company) with the current, systemic crisis, and presents an example of a phased contingency plan with roles, an assessment of the company’s state, access and protection measures and care for vulnerable staff. He then explains the methods for calculating operational-risk capital (basic indicator, standardized and advanced) and Basel’s new standardized method, based on a business component and a historical-loss multiplier, with its advantages, the expected increase in capital and the likely delay in its entry into force.

Topics covered

• Pandemic effects on operational risk: remote work, technology and fraud
• Reinventing processes and new risks of digital transformation
• Role of the operational risk manager and the first line of defense
• Historical operational-risk cases versus a systemic crisis
• Phased contingency plan for the pandemic
• Operational-risk capital: basic indicator, standardized and advanced
• Basel’s new standardized method and its entry into force