Operational Risk ICAAP Practice Benchmark
- 20 February 2020
This ORX Practice Benchmark was carried out in response to the interest from our membership on how to best coordinate and govern the operational risk component of the Internal Capital Adequacy Assessment Process (ICAAP).
Find out how mature your ICAAP practice is
This study is part of ORX's Practice Benchmark series. Practice Benchmarks enable you to see how mature your institution’s operational risk management practices are against the rest of the industry. All firms that take part receive a customised benchmark report showing where their practice sits against the other participants. This helps you easily identify what you're doing well and where you could improve.
Practice Benchmarks aren’t only available to ORX members, they're also are available to non-members of ORX for £1,000.
Download the free summary report
In addition to the individual benchmark reports produced for each participant, we also create a detailed report analysing the results of our findings on operational risk ICAAP practice as a whole. This report is available to all members of ORX (sign in required). From this report we've created a summary, including some of the study highlights, which you can download for free.
The practice benchmark showed that most firms are moving towards maturity, however there are four key areas where firms can strengthen their practice:
- Controls can use systems to improve efficiency
- Challenge session outcomes can be used as evidence
- Using stronger documentation leads to stronger linkages
- Clearer roles for senior leadership and the board can improve engagement
1. Controls can use systems to improve efficiency
One of the top challenges identified in the study was the amount of resource and the length of time ICAAP requires. The key controls that firms have in place are mostly manual and participants’ operational risk ICAAP processes could benefit from controls best practices and the increased use of systems.
2. Challenge session outcomes can be used as evidence
The typical challenge session requires engaging stakeholders from multiple disciplines to verify various scenarios and actively debate the details of each part of the submission. Documentation can help provide evidence of the outcomes of challenge sessions, in turn, speeding up approvals down the line.
3. Using stronger documentation leads to stronger linkages
The operational risk ICAAP shows linkages to other programmes. Using stronger documentation to reference other frameworks and risk types would improve the links between operational risk ICAAP and daily activities.
4. Clearer roles for senior leadership and the board can improve engagement
For many firms, engagement from senior leadership and the board is limited to being responsible for the process, although some firms do involve leadership in their challenge sessions and validation. Those institutions looking to deepen engagement may consider documenting and communicating the need for increased involvement from these areas at the outset of the process.
Could you improve coordination and governance of ICAAP at your firm?
ICAAP is required in many banks, but how does the operational risk aspect of the process in your firm compare to the rest of the industry? The ICAAP governance and coordination practice benchmark helps you understand common industry practice around this process and helps you identify where yours differs. Although this study has now finished, you can still purchase the Operational Risk ICAAP Practice Benchmark, which includes:
- A full report looking at trends and practice at an industry level
- An individual benchmark report showing how their practice compares
ORX Members can get the operational risk ICAAP overall trends report and the individual benchmark for free as part of their ORX Membership subscription. If you're not a member, then you can still get a copy of the full report and complete the survey to see how mature your ICAAP practice is compared to the other firms that took part. It costs just £1,000 to get your own Operational Risk ICAAP Practice Benchmark.