Financial and operational resilience can no longer be managed separately as risks cascade rapidly across systems. Søren Agergaard Andersen explains why firms must integrate governance, scenario planning, and decision-making to prepare for complex, interco
In today’s risk environment, the
traditional separation of financial and operational resilience is no longer
sufficient.
As Søren Agergaard Andersen, Chief
Risk and Compliance Officer at Copenhagen Infrastructure Partners, explains,
risks no longer emerge in isolation but cascade rapidly across multiple
domains, creating complex and often unpredictable impacts.
“We can no longer purely look at each
risk category in isolation,” Andersen says, emphasizing that while stress
testing may still focus on individual factors, real-world events do not.
A funding squeeze, for example, can
quickly evolve into operational strain through collateral bottlenecks, before
escalating into conduct and reputational risk. Similarly, cyber incidents can
trigger payment disruptions, liquidity stress, and regulatory escalation.
These dynamics highlight a
fundamental shift. “Operational shocks become financial shocks with a very
short time delay,” Andersen notes, underlining the speed at which risks now
propagate across systems.
For financial institutions, this
interconnectedness presents a significant challenge. Integrating liquidity,
capital, and operational resilience into a unified framework requires more than
technical capability.
“It requires a strong governance
architecture,” Andersen explains, pointing to the need for clear ownership at
the chief risk officer level, defined escalation pathways, and cross-functional
coordination through resilience committees.
Establishing this framework is
foundational but difficult. It demands not only a deep understanding of
processes and controls but also the ability to map critical functions and
develop an integrated risk taxonomy.
This is particularly important for
identifying second-order effects, which are often overlooked. For example,
market stress may create both financial pressure and operational strain, such
as overload in redemption processes.
Scenario planning is another area
undergoing transformation. Traditional stress tests, typically focused on
single variables, are no longer sufficient.
Andersen argues that firms must
expand their approach to include more complex, multi-dimensional scenarios.
“We are all used to working with
classic single dimension scenarios, but these need to extend with a broader
scope,” he says.
A cyber failure occurring during a
volatile market is one such example. In this scenario, firms must consider the
combined impact on trading, risk monitoring, and client communication.
