The Inside View
Guy Leroux
GuyLeroux is now Vice President in Operational Risk Management at a leading Investment bank.
NQ.com:
What is Operational Risk?
Guy:
Operational Risk Management (ORM) has been gaining a lot of attention lately, mainly as a result of the inclusion of an operational risk charge on the capital adequacy return of banks (Basel II Accord) and the large corporate failures of recent years (Enron, WorldCom, etc).
The industry is not yet in agreement with a common definition of operational risk but the Basel Capital Accord defines operational risk as: "The risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems, or from external events."
NQ.com:
What opportunities are there for accountants within ORM?
Guy:
By looking at internal controls and making sure that the financial statements are fairly stated, accountants have already been playing a key role in the management of operational risk, without actually calling it ORM. A glance at the definition of operational risk above is unlikely to be totally unfamiliar to most accountants since the first three events (processes, people & systems), which most accountants understand, should be part of an assessment of adequate internal control environment. The last one "external events" is trickier as it touches on a far deeper understanding of the particular business under consideration.
Accountants have transferable skills that can be adapted to focus on the risk components of any transaction instead of the control components of that same transaction. When looking at a business from a Risk perspective it really is just a change of focus - bringing in not only accounting skills but also wider business acumen.
The work can be varied - from identification of operational risks to helping line managers to address these risks. The tasks involved can be Front-to-Back reviews, assessment of operational risks in a particular area, metrics review, and incident reporting reviews or more bespoke tasks.
NQ.com:
What are companies looking for from applicants in the interview process?
Guy:
Because Operational Risk Management is a relatively new discipline demand tends to be for people in related areas who can be trained in a relatively short period of time to become good operational risk professionals. Accountants are well placed due to their structured training. At interview applicants should demonstrate their flexibility to deal with different assignments and emphasise their trained eye to identify control weaknesses, which could potentially turn into risky situations.
NQ.com:
Where can a career in ORM take you?
Guy:
Accountants moving into ORM can easily switch back to a more finance-aligned role or line management should they wish to do so.
For those of you still interested in some further studying (!) I can recommend the Advanced Operational Risk certificate from the Securities and Investment Institute.