Operational Risk Horizon 2018

  • 21 March 2018

The Operational Risk Horizon was a new initiative from ORX offering two key benefits – the ability to benchmark your top current risks and to identify emerging risk trends. 

Forty-four banks and insurers took part, submitting their current and emerging operational risks ranked according to importance. We've just published our summary report, which you can download below.

About the study

The study aggregates these risks, and explores how participants believe the landscape will change over the next few months and years. Our findings are based on the analysis of 377 operational risks and 282 emerging risks.

These were categorised to create two overall lists – a top operational risk list and a top emerging risk list. This ranking accounts for both the number of submissions and the ranking of each submission.

The top emerging and operational risks

Comparison of the top five emerging and operational risks

Conduct the top operational risk

Risks associated with conduct come out as the most significant industry concern. Three quarters of the participants identify at least one conduct issue in their top ten operational risks.

This was closely followed by information security and cyber risk. Eighty-four per cent include an IT security risk in their top ten. These risks are elevated by two trends – the complexity of the digital landscape, and financial services firms' increasing dependence on systems and data.

Theft and fraud remained the third most highly ranked category, while regulatory compliance jumped three places to make the top five.

New technology dominates emerging risks

Despite not entering the top five operational risk list, digital disruption is ranked the overall highest emerging risk category. Information security and cyber risk is ranked second on both the current and emerging risk lists, showing that risks from hacking, data breaches and other cyber threats are expected to remain high.

Global uncertainty is also believed to pose a significant challenge. Chief concerns include the policy direction of the Trump administration and the uncertain consequences of Brexit, as well as ongoing tensions across Asia and the Middle East.

Overall risk profile set to increase

Risk profile bar chart

Almost every risk category is expected to increase in the next three years. Technological change is driving much of this, with risks associated with digital disruption expected to increase the most, but so is persistent regulatory attention. 

Interestingly, despite being the highest ranked operational risk, only half of submitted conduct risks are expected to increase over the next three years.

Top operational risks by region

Conduct risk is the top ranking category in Europe and Asia. Study participants from those regions highlighted the risks associated with retail mis-selling and advice failures. In contrast, African and North American banks put information security as their top risk.

Top risks by region map. North America and Africa are information security and cyber risk. Europe and Asia/Pacific are conduct risk

Download the summary report

Operational Risk Horizon summary report

Find out more

To find out more about this study, or how you get involved in our projects in the future, get in touch.

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