Summary |
Despite the deficiencies of current strategic risk management practises, the input of operational risk teams in big strategic decisions is still limited. Research has shown that few operational risk managers feel they have anything more than an advisory role when it comes to strategic planning. The regulatory community has been aware of this issue for some time, and has been attempting to encourage companies to pay more attention to op risk concerns in the context of strategic decision making. Operational risk teams will have a lot of work to do in the coming years as their role in strategic risk management increases, and will require guidance.
Strategic Risk Management explores this topical and important area, which examines the risks posed to a firm by its corporate strategy and business model. Strategic Risk has become a significant focus for firms which have experienced substantial losses and even bankruptcy for failing to manage these risks. In financial services the failure of misplaced or misguided strategy can be catastrophic.
Many recent operational risk management events have been a result of poor strategic risk management. For example, the collapse of MF Global came on the heels on a strategic shift in the company which their internal infrastructure was completely unable to handle. Other crises at financial institutions which were a result of poor strategic risk management include the merger between Bank of America, Countrywide and Merrill Lynch (after which it had to pay billions in legal costs and compensation to settle the charges against the two banks it acquired) and Barclays, which was fined by the SEC for failing to upgrade its compliance procedures to cope with the additional burden of its acquisition of Lehman Brothers' advisory business.
Author Dr Patrick McConnell, a Visiting Fellow at Macquarie University Applied Finance Centre in Sydney (where he teaches Masters-level courses on Strategic Risk Management), has been publishing and teaching in the area of Strategic Risk for several years. Dr McConnell also has over 30 years’ experience in Information Technology and Risk Management and has been employed by, and consulted for, the Australian government in addition to major banks and corporations in the US, Europe and Australia. Strategic Risk Management provides a balanced combination of both hands-on experience and theoretical reasoning, explaining the organisational (re)alignments to ensure that the necessary changes are made.
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