How Operational Risk can Gain Credibility and More Effectively Protect the Organization

display-middle-ads-here

Operational risk used to be the boring part of banking – a department bogged down in controls testing and incident reports, hidden from the front line. But not anymore.

In today’s volatile, high-stakes environment, operational risk is either a strategic weapon or a liability waiting to explode. And unless we reinvent the way we work, the next big crisis won’t come from credit or market risk – it’ll come from the cracks we failed to see in our own operating foundations.

At this year’s Risk Americas conference, a candid conversation about the future of operational risk laid bare the urgent need for transformation.

The message was clear: traditional models, rooted in backward-looking control functions, are no longer fit for purpose.

Instead, operational risk must become deeply embedded in the business – present in every product conversation, every process redesign, and every tech deployment. If we’re not inside the room where the decisions happen, we’re too late.

The key to relevance lies in structural integration. We have to dismantle the silos that separate risk teams from the business. Organizing around abstract taxonomies or regulatory categories only distances us from real-world risk signals.

Putting operational risk leads closer to first-line product teams – side by side with revenue generators and engineers – creates fluency in the processes we’re meant to safeguard. Maintaining second line independence is still crucial, and a closer partnership with the business can also enable the operational risk function to reinforce the importance of the three lines of defence roles and responsibilities.

It turns metrics from generic indicators into tools that actually matter: things that track process volumes, revenue exposure, or breakage rates, not abstract KRI categories.

This new structure calls for hybrid teams – practitioners who combine horizontal expertise in areas like cyber, third-party risk, or tech with a deep vertical understanding of the business.

These aren’t back-office analysts. They’re operational strategists who design metrics with meaning. When you align data with product realities, the outputs change. You move from stale dashboards to risk insights that trigger action.