Baker McKenzie partnered with Risk.net in its annual ranking of the top operational risks for 2021. The report is based on a survey of 100 chief risk officers, heads of operational risk and senior practitioners at financial institutions, including banks, insurers, asset managers and infrastructure providers.

In this new episode of FInsight: Global Financial Institutions Industry Podcast, Karen Man and Jennifer Klass, financial regulatory partners in Hong Kong and New York respectively, talk about the survey and and share perspectives on what clients are experiencing in the market. They also give situational examples in light of the continuing push for digitalization and sustainability, including relevant action items for senior executives.

There is evidence of increased levels of cyber-crime and COVID-19-related frauds and scams. These developments remind banks and other organizations to take risk-sensitive measures to establish the origin of unexpected financial flows from customers in sectors known to have been impacted by the economic downturn and COVID-19 mitigation measures, such as laxer KYC for emergency loans.

While all FIs are subject to operational risk, the issue is particularly acute for financial infrastructure providers as failures have a potentially wider impact on financial stability and the operation of the wider market. Moreover, it is fair to say that operational risk and resilience has risen up the list of regulatory priorities in recent years.

Looking ahead, there are always future risks that FIs need to prepare for. Regulators are focused on ensuring that enterprises are reinforcing their controls and putting in place procedures to try to manage operational risk. These, along with ESG considerations, are certain to influence future risks for FIs.

You can read the Top 10 Op Risks for 2021, with an editorial and Q&A from Christoph Kurth where we cover some of the rapid technological changes under way brought about by, and in the wake of, the COVID-19 pandemic. He also talks about important topics around governance, change management, incident readiness, cloud-based infrastructure, and the importance of continued investment and change.

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