Regulatory guidance

As a minimum all companies must adhere to regulatory requirements. However,
there are few countries where specifically drafted requirements cover operational risk
management. The Bank of International Settlements (BIS) have just published a set
of requirements on internal control which contain guidance in operational risk
management. It is expected that regulators in each country will incorporate these
into their own regimes. However, some regulators would claim that they already have
a robust approach to operational risk.
Different countries have different approaches to operational risk. In the United
Kingdom the Bank of England has since the Banking Act 1987 asked banks to
appoint reporting accountants to review under Section 39 of that Act the internal
control environments and to report on their adequacy for the risks to which each
firm is exposed. The Bank of England published a Guidance Note on Reporting
Accountants’ Reports on Internal Controls and other Control Systems which provides
a description of key controls and their expectations about their adequacy. In the next
year the author expects further regulatory guidance on operational risk.
Various countries already have the elements of operational risk regulatory
frameworks:
Ω RATE process in the UK
Ω CAMEL process in the USA
Ω BAK Minimum Requirements for Trading Institutions in Germany
The challenge for the regulators is to build an approach on the solid foundations
already established in many countries.