The Rise of Operational Resiliency: How COVID has prompted a renewed focus on operational risk management

3 December 2020 - The ongoing pandemic, geo-political unrest, climate events and continuing trade wars are constituents of the most sustained stress test the world has seen in recent history, which has prompted investment managers, investors, regulators and asset servicers to refocus on the true meaning and value of operational resiliency.

Since the financial crisis of 2008/09, companies have focused on building financial resiliency to help absorb shocks to capital and liquidity; yet events this year – COVID in particular – have put a lens on the importance of overall operational resiliency to weather multi-faceted storms of such a global magnitude.

As pandemics are slow burning, come in waves and test the resiliency of companies in unforeseen ways, COVID is a real-time example of how effective operational risk management is essential. At the Citco group of companies (Citco), we understand the impacts of pandemic events go beyond those of traditional business continuity management, which is why we are proud to co-author the recently published AIMA Guide to Sound Practices for Operational Risk Management under the chair of AIMA and PWC, together with co-authors from the alternative investment management industry.

What is the key to protecting and creating value across a business? An enterprise-wide, integrated approach to risk management and business resiliency will enable you to focus on protecting your staff, clients and investors’ interests while maintaining momentum on your strategic objectives, as we have found. Operational risk management needs to be embedded within your company’s DNA.

In the short to medium term, the post pandemic world will involve a considerable amount of transformational change within risk management. Some will be a continuation of change programs paused due to COVID, others will be programs that have been accelerated because of it. This could include transitioning to lower-density offices, greater use and scrutiny of outsourced services, diversification of supply chains or acceleration of intelligent automation.

AIMA’s Guide to Sound Practices helps you to navigate the need for these programs by providing an overview of the key Operational Risk Management elements. Also, it offers insights for investment managers looking to implement effective risk mitigation plans to keep organizational risks within acceptable limits. Regardless of size, complexity or level of risk maturity, this guide allows the reader to dip in and out of subject matter that is most relevant to their company.

Leveraging our mature Enterprise Risk Management framework, Citco is able to fully integrate all aspects of resiliency, creating a proactive attitude towards managing risk and a strong recognition that risks are inter-connected, travel at different speeds and insert themselves at different places within our organization.

This strategically driven, holistic approach helps support coherent decision-making and delivers the right assurance to our clients and their investors during times of flux and change. Our unique blend of industry and risk management expertise creates the ideal partnership to help our existing and future clients reach their strategic and business objectives.

By Lewis Clements, Executive Vice President, Citco Fund Services (Singapore) Pte. Limited, Regional Head of Group Risk Management Asia and co-author of the 2020 AIMA Guide to Sound Practices for Operational Risk Management.