Operational Risk and Corporate Sustainability Relationship Using Case‑Based Reasoning

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This research develops a taxonomy of operational risks impacting corporate sustainability. A literature review and analysis of 100 business cases reveal relationships between these risks, their causes, and their economic, social, and environmental consequences. The findings help companies classify and manage sustainability-related operational risks, though the specific relationships may vary across sectors and individual cases.

Generative AI and Its Role in Shaping the Future of Risk Management in the Banking Industry

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Generative AI (GAI) is transforming banking risk management, improving fraud detection by 37%, credit risk accuracy by 28%, and regulatory compliance efficiency by 42%. GAI enhances stress testing but faces challenges in privacy, explainability, and skills gaps. Its adoption, led by larger banks, demands holistic strategies for equitable industry impact.

FINMA guidance on governance and risk management when using artificial intelligence

AI adoption in finance introduces risks like model inaccuracies, data security issues, and cyber threats. FINMA notes many institutions are at early development stages for AI governance. It urges better risk management to protect business models and enhance the financial center's reputation.

ECB Supervisory priorities 2025‑27

The ECB has decided to keep capital requirements largely unchanged for 2025 due to the strong performance of banks. However, specific banks will face additional capital requirements due to insufficient provisioning for non-performing loans and high exposures to leveraged loans. The ECB emphasized the need for banks to address governance, risk management, and operational resilience, particularly in light of macroeconomic threats and digital transformation challenges.

FCA CP: Operational Incident and Third Party Reporting

The FCA's proposed new regulations require firms to report operational incidents that could harm consumers or the financial system. This broadens the scope of reporting beyond traditional principles. Additionally, firms must notify the FCA of material third-party arrangements, including those that pose risks to the financial system or the firm's ability to meet regulatory obligations. This expanded regulatory focus on the entire lifecycle of services and activities highlights the increasing importance of operational resilience and third-party risk management.

OCC Reports on Key Risks in Federal Banking System

The OCC reports that operational risk is elevated due to cyber threats and complex operations. Compliance risks are also significant, especially in areas like BSA/AML and fraud prevention. External fraud targeting consumers and banks is increasing, requiring strong fraud management practices. Banks should prioritize risk management, maintain sound controls, and educate customers to mitigate these risks.