The Basel Committee, the global banking regulator and part of the Bank for International Settlements, has published an update on the adoption and implementation of the Principles for Operational Resilience (POR) and the revised Principles for the Sound Management of Operational Risk (PSMOR) among banks.
Published in March 2021, these principles aim to enhance banks’ resilience against operational risks that could lead to significant failures or disruptions in financial markets.
The Committee’s assessment in early 2023 found varying levels of effectiveness and maturity in adopting these principles across different banks and jurisdictions.
Key challenges identified include difficulties mapping interconnections and dependencies of critical operations and defining tolerances for disruptions. While some areas like operational risk management governance are well-established, others like board roles in operational resilience and management of third parties aligning with resilience expectations require further development. The necessity for banks to identify and respond to operational risk-related events has led to well-established incident management practices in most jurisdictions.
Despite progress, full adoption may take until at least 2025 in some jurisdictions. The assessment underscores the importance of leveraging all aspects of operational risk management to achieve operational resilience, acknowledging that it goes beyond business continuity. The Committee emphasises the need for banks to establish and maintain accurate data on critical operations and stresses the foundational role of mapping interconnections for successful adoption of the principles. To strengthen banks’ operational resilience, the Committee encourages full adoption of POR and PSMOR into their operational risk management practices and regulatory frameworks, with new guidance and regulations by national authorities contributing to this effort.
Full details available here.
[Image Source: Bank for International Settlements]
