BCBS Consults on Principles for Operational Risk and Resilience

The principles for sound management of operational risk have been revised post the 2014 BCBS review of the implementation of the principles. The review indicated that several principles had not been adequately implemented and that the principles did not sufficiently capture certain important sources of operational risk. Thus, BCBS is proposing a limited number of updates to:

• Align the principles with the recently finalized Basel III operational risk framework
• Update the guidance, where needed, in the areas of change management and information and communication technologies
• Enhance the overall clarity of the principles

In another associated consultation, BCBS is proposing a pragmatic, principles-based approach to operational resilience that will help to ensure proportional implementation across banks of various size, complexity, and geographical location. The proposed principles for operational resilience not only build on the proposed updates to the Principles for Sound Management of Operational Risk, but they are largely derived and adapted from the existing guidance on outsourcing, business continuity, and risk management-related guidance issued by BCBS or national supervisors over a number of years. The proposed operational resilience principles focus on governance, operational risk management, business continuity planning and testing, mapping interconnections and interdependencies, third-party dependency management, incident management, and resilient cyber security and ICT. As an essential element of operational resilience, internationally active banks should consider whether their operational resilience efforts are appropriately harmonized with the stated actions, organizational mappings, and definitions of critical functions and critical shared services contained in their recovery and resolution plans as specified in the FSB Recovery and Resolution Planning framework. The principles aim to strengthen the ability of banks to withstand operational risk-related events, which could cause significant operational failures or wide-scale disruptions in financial markets, such as pandemics, cyber incidents, technology failures, or natural disasters. 

Related Links

• Press Release
• Proposed Operational Resilience Principles
• Proposed Operational Risk Principles

Comment Due Date: November 06, 2020

Keywords: International, Banks, Basel, Operational Resilience, Systemic Risk, Cyber Risk, ICT Risk, Outsourcing Arrangements, Business Continuity, BCBS