Risk Tips Issue # 24: Regulatory Risk

  • Feb 09, 2018
  • RIMAN, Boston Consulting Group, RiskNet

To many Risk Practitioners, the landmark regulations of the post-crisis era – the overhaul of the capital adequacy framework, widespread market structure reforms, far-reaching changes to accounting practices – represent a laundry list of potential Operational Risks for their institution.

Fines and penalties for non-compliance, the restructuring of desks and operations and the shuttering of businesses all present complex and hard-to-model threats.

To most Operational Risk Professionals, the Basel Committee on Banking Supervision's proposal to replace the Advanced Measurement Approach (AMA) for modeling Operational Risk is already presenting all manner of  issues.

By requiring firms to hold the same amounts of operational risk capital against all forms of business, Regulators are encouraging firms to enter businesses that exclusively expose themselves to operational risks to maximize their return on equity, argued Operational Risk Practitioners.


Is Regulatory Risk among the top risks for every organisation?


In order to answer this question we take a closer look at some of the following underlying concern:

Regulations are changing frequently and becoming more complex as well
The number of rule changes that banks must track on a daily basis has tripled since 2011, to an average of 200 revisions a day according to BCG
Complex and hard-to-model threats
All the rules and regulations since the financial crisis makes it imperative to be quick in our adoption and interpretation. It doesn't give us a lot of time to react

Regulators have used the stick of fines and sanctions to bring more order. There is a danger that these will become more and more punitive, such that it will be difficult for firms to recover. 

Quick Pick

Risk of Fuel Tanker Fire

Mitigation Strategies

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Risk Management Association of Nigeria (RIMAN) in collaboration with the National Pension Commission (PENCOM) is organising a risk round table in Abuja to discuss the challenges of risk management, pension risk management as well as regulatory risk in the financial Institutions. As usual, the programme will be a gathering of…

Meet the first set of Certified Risk Managers (CRMs) in Nigeria

The pioneer industry recognised professional examination in risk management which is jointly run by two foremost professional bodies in Nigeria , Risk Management Association of Nigeria (RIMAN) and The Chartered Institute of Bankers of Nigeria  (CIBN) recently produced the first set of Certified Risk Managers in the Country.  They are…