OSFI issued a letter to the federally regulated financial institutions seeking their views on certain aspects of its approach to the operational risk and resilience framework. One aspect OSFI is seeking views on is how it can position its perspective on operational risk and resilience within its principles-based guidance framework (including Guideline E-21). Views are also being sought on ways to address connections to related risks within the OSFI approach to operational risk management and operational resilience; the related risks include technology and cyber risks; third-party risk; model risk; and culture, compliance, and reputational risks. Stakeholders can submit comments until September 10, 2021.
BCBS published guidance in March 2021 on operational risk and resilience and OSFI, as a BCBS member, had participated in the work that led to the publication of the revised principles for sound management of operational risk and the new principles for operational resilience. OSFI believes that the revisions to the principles for sound management of operational risk strengthen BCBS guidance on operational risk management while the principles of operational resilience introduce the concept of operational resilience. Earlier, on December 15, 2020, OSFI had concluded a consultation process on its September discussion paper titled "Developing financial sector resilience in a digital world," which highlighted certain aspects of operational resilience. OSFI views operational resilience as an important objective of operational risk management and believes that operational resilience encompasses a number of risk management practices and capabilities; these include articulating risk appetite and setting risk tolerances for operational risk; identifying and analyzing critical operations, interconnections, and interdependencies; using scenarios and testing to assess resilience capabilities; and preventing, responding, adapting, recovering and learning from operational disruptions. While the existing Guidelines and Advisories of OSFI cover many of these areas, there are opportunities to strengthen its guidance expectations to enhance operational resilience at financial institutions, including both deposit-taking institutions and insurance companies. As part of implementing any guidance on operational risk and resilience for financial institutions, OSFI will consider whether certain elements of this guidance could also be relevant to federally regulated pension plans.
Keywords: Americas, Canada, Banking, Insurance, Pensions, Operational Risk, Operational Resilience, Guideline E-21, Third Party Risk, Cyber Risk, Model Risk, Technology Risk, OSFI
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