Here is the converted article in Markdown format:
Banks Must Integrate Compliance Framework with Operational-Risk View
In today’s complex regulatory environment, banks must adopt a modern compliance framework that is fully integrated with their operational-risk view of the world. This integration offers tangible benefits, including a comprehensive view of risk portfolios and visibility into systemic issues.
According to experts, integrating compliance management with operational-risk management can significantly reduce burdens on both the business and control functions. It also enables a risk-based allocation of enterprise resources and facilitates effective remediation and investment in cross-cutting controls.
To achieve this integration, banks must take practical actions, including:
- Developing a single inventory of operational and compliance risks
- Creating standardized risk, process, product, and control taxonomies
- Coordinating risk assessment, remediation, and reporting methodologies
- Defining clear roles and responsibilities between risk and control functions
- Jointly managing training and communication programs
- Establishing governance processes and structures that span across risk and support functions
Measuring Progress
To ensure successful integration, banks must measure progress against desired outcomes. A scorecard with ten key indicators can help track progress, including:
- Demonstrated focus on the role of compliance and its stature within the organization
- Integrated view of market risks with operational risk
- Clear tone from the top and strong risk culture
- Risk ownership and independent challenge by compliance
The Future of Compliance
Regulatory compliance has undoubtedly posed challenges for banks. However, by implementing targeted changes to its operating model and processes, the compliance function can deliver a better quality of oversight while increasing efficiency. Banks that make this shift will be well-positioned to succeed in the foreseeable future.
In conclusion, integrating compliance management with operational-risk management is crucial for banks seeking to improve their risk posture and increase efficiency. By taking practical actions and measuring progress against desired outcomes, banks can maximize the impact of this transformation and achieve a distinctive source of competitive advantage.