Marsh Comments on UK’s ‘More Focused Business Management’

According to a bulletin from Marsh’s London office, “businesses in the UK’s financial services sector are moving away from a compliance led approach toward operational risk, adopting instead more focused risk management and business process performance-based practices.”

Cristiana Báez-Safa, Managing Director in Marsh’s FINPRO (Financial and Professional Services) Practice, noted: “Many large European financial institutions have changed the direction of their operational risk projects as often as two or three times since starting their compliance efforts.”

“From simply taking a narrow view, ‘what can I do to comply with Sarbanes-Oxley and Basel II?’, for example, risk managers in the financial services sector are now asking themselves how they can help improve business process efficiency, reduce operating costs and mitigate the risks that concern the Board most.”

She also indicated that “the longer-term trends in operational risk management are greater penetration and coordination of risk management across all facets of the business; more detailed scenario planning in key areas of potential exposure; and tailored risk transfer solutions for operational risk.”

Managing their Insurance program “is an integral part of operational risk management best practice,” Báez-Safa continued “In order to get the best from their risk mitigation processes and insurance programs, UK-based financial services firms can utilize and benefit from Marsh’s three main work streams in the Operational Risk area, namely insurance gap analysis/insurance filters, Basel II compliant insurance policies, and product innovation. This approach allows financial institutions to more effectively tailor their insurance programs to their specific risk profile and risk mitigation objectives.”

She stressed that “by adopting this approach, businesses will benefit from informed decision-making on the extent and structure of insurance to be purchased; improved insurance coverage; greater certainty of contract, which can be factored into the financial institution’s economic capital calculations; and perhaps most importantly in terms of compliance, an audit trail of decision-making about insurance, to enhance protection for boards of directors coming under closer scrutiny to protect an institution’s assets.”

Topics Risk Management