Sound Practice Guidance
These sound practice guidance papers are designed to assist companies implement the various components that make up a robust risk management framework. It is the Institute’s intention that these Guidance papers evolve over time as we receive feedback and suggestions from individuals/companies who have used them. If any reader of any Sound Practice Guidance has any experience or opinions that they believe may enhance the guidance offered, they should email standards@ior-institute.org
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Sound Practice Guidance - Part 4
November 2010
Risk indicators are an important tool within operational risk management, facilitating the monitoring and control of risk. In so doing they may be used to support a range of operational risk management activities and processes, including: risk identification; risk and control assessments; and the implementation of effective risk appetite, risk management and governance frameworks (see IOR Guidance on Risk Appetite and Risk Governance).
Despite their usefulness relatively little guidance exists on how to use risk indicators in an effective manner. Moreover it is an area that has proven to be particularly challenging for many organisations. Hence there is a need for further guidance in this area.
What follows is the IOR’s perspective on current sound practices in relation to the use of risk indicators to support the management of operational risk. In so doing, this guidance covers the role and purpose of risk indicators, the elements of an effective risk indicator framework and some important practical considerations relating to the use of such frameworks within an operational risk management context.
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Sound Practice Guidance - Part 3
September 2010
A firm's organisational culture, its values and valued behaviours, will underpin its risk culture. It may be entrepreneurial; it may be risk averse and have a strong control element, or it will fall somewhere in between.
The valued behaviours which mark out a healthy corporate culture, supportive of good risk management, include: clarity, openness, trust and, importantly, honesty and integrity. Openness and transparency encourage comprehensive risk reporting and also encourage a challenging debate about risk at every level of the organisation. The challenge may come from the CEO and senior management but, equally, lower levels of the organisation should be encouraged to report or comment on risks they see or new and emerging risks of which they become aware.
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Sound Practice Guidance - Part 2
March 2010
The aim of an operational risk framework is to identify, assess, control and mitigate operational risk and to champion effective reporting of risk and emerging risk issues.
RCSA forms an integral element of the overall operational risk framework, as it provides an excellent opportunity for a firm to integrate and co-ordinate its risk identification and risk management efforts and generally to improve the understanding, control and oversight of its operational risks.
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