The Risk Management Association's KRI Services, developed and implemented in conjunction with RiskBusiness International, used the annual Ri$k Minds 2006 conference in Geneva to announce that Subscriber Working Groups have agreed on a set of key risk indicators (KRIs) to focus on as they begin to explore benchmarking operational risks in Trading and Sales. This represents a milestone toward benchmarking KRIs.
Philadelphia, Pa. (December 15, 2006) - A set of approximately 35 key risk indicators (KRIs) has been identified by representatives of KRI Services Subscribers as being particularly relevant for managing operational risks in the Trading and Sales business line. This set can serve as a point of reference by institutions as they refine their operational risk management practices for this area of activity. The next step is for selected members of these working groups to begin benchmarking specific KRIs on a test basis. Defining this set of KRIs represents a milestone for RMA’s three-year-old service and a significant achievement for the working groups concerned, particularly the Global Trading and Sales Working Group.
The chairperson of the Global Trading and Sales Working Group, Brian Johnson of Investec plc, said, "Key Risk Indicators are a fundamental component to ongoing assessment and evaluation of risk. While different banks are at different stages of identifying, collating and capturing KRI data, it is a good time for the Trading & Sales community to be thinking about KRIs. We have identified this set of roughly 35 indicators. We hope that several of these will be widely adopted, so that institutions may:
(a) Focus their KRI programs on capturing data on these critical indicators.
(b) Benchmark these KRI values with their peers.
(c) Encourage others to adopt these KRIs.
Johnson also stated, "Selected members of the Trading & Sales Working Group are now preparing to benchmark specific KRIs on a test basis. Getting to this stage has been no easy task. RMA has built a secure technology platform and set of institutional arrangements to ensure data security, confidentiality and anonymity. At the same time, participating members have had to agree to submit data in the right form at the right time, with any necessary internal clearances arranged beforehand. We believe it will be worth it, however. Participating firms will benefit greatly when they can tell if their values for these critical KRIs are within or outside normal thresholds for the industry."
It is important to note that Johnson's comments should not be interpreted as an endorsement of the RMA technology platform and the data security arrangements surrounding it, which are being used in the testing.
Charles Taylor, RMA director of Operational Risk, said, "The Global Trading and Sales Working Group is at the forefront of realizing the vision of KRI Services since the program's 2003 inception. Many of the founding firms worked on the KRI Library Services initiative with an eye toward establishing a robust and reliable benchmarking service. We expect this initial milestone to be the first of a series in the coming months."
RiskBusiness Managing Director Mike Finlay said the success of KRIs depends on the value delivered. Finlay said, "Any indicator program within a firm has three types of users:
- Managers who run business and function units.
- Middle managers who are interested in exposures, performance and control effectiveness.
- Senior/executive management who want to know when exposures exceed the defined risk appetite of the firm.
A common set of KRIs, like those defined here for Trading and Sales, can help all these users know when they are looking at a sensible set of indicators. Then benchmarking has the potential to help establish and validate thresholds that can give users greater insight in different critical business areas."
RMA has supported the establishment of several industry working groups in different business lines and geographies within KRI Services. These groups are working to improve KRI usage in their specific areas, including the launching of benchmarking. Groups currently operate at both the global and regional level in the areas of:
- Trading and sales
- Payments and settlements
- Private banking
- Retail banking
- Insurance
- Asset management
- Business continuity
- Information technology
The Working Groups addressing Trading and Sales, especially the Global Trading and Sales Working Group, are among the most advanced and would welcome wider participation from eligible firms.
Additional indicator benchmarking is planned in the near future in the areas of anti-money laundering and business continuity management globally, as well as regionally for specific aspects of home loans and credit cards in Australia, South Africa, the United Kingdom, and Central and Eastern Europe.
This reference set of indicators for Trading and Sales has been flagged within the KRI Library, where Subscribers can review the detailed specifications for each indicator.For more details, or to express an interest in becoming a subscriber to RMA’s KRI Services, contact KRIeX.org.
About RMA
Founded in 1914, The Risk Management Association is a not-for-profit, member-driven professional association whose sole purpose is to advance the use of sound risk principles in the financial services industry. RMA promotes an enterprise-wide approach to risk management that focuses on credit risk, market risk, and operational risk. Headquartered in Philadelphia, Pennsylvania, RMA has 3,000 institutional members that include banks of all sizes as well as nonbank financial institutions. They are represented in the Association by 17,000 risk management professionals who are chapter members in financial centers throughout North America, Europe, and Asia/Pacific.
About RiskBusiness International Limited
RiskBusiness International Limited is a risk consultancy specializing in leading operational risk management practices. It is an association of like-minded industry professionals, who have the aim of furthering the risk management discipline to enable better risk-reward decision-making.
Risk management is an evolving discipline, which has developed in close partnership with the industry. RiskBusiness has, both as individuals and collectively, a depth of established relationships with leading players and regulators in the operational risk field. We are also active participants in industry working groups and contribute thought leadership through publications and education.
RiskBusiness was founded in 2003. The registered head office is in England, with principal consultancy locations in London, New York, Hong Kong and Zurich. RiskBusiness consists of only seasoned industry players who have proven experience in designing, delivering, implementing and maintaining leading risk practices.
About KRIeX
www.KRIeX.org is the home of the KRI Library Services, a repository for key risk indicators identified, defined, and specified by over 70 leading international financial institutions, sponsored by RMA and facilitated by RiskBusiness International Limited. Please contact KRIeX at info@KRIeX.org.
RMA Contacts:
Charles Taylor, RMA Director of Operational Risk
+1 215 446 4126
Kathleen M. Beans, RMA Public Relations Manager
215-446-4095
RiskBusiness International Limited Contact:
Mike Finlay, Managing Director
+44 7721 969224