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Eversheds comment: Majority of 2011 FSA fines due to weak risk management PDF Print E-mail
Monday, 05 March 2012

Sixty percent of the fines handed down by the FSA in 2011 were a result of weak risk management systems, totalling £38.5 million.  Lee O’Connell, Group Risk Manager at Eversheds Consulting, a division of international law firm Eversheds, comments:

“The problems associated with poor risk management are cause for much concern, and these figures are only the tip of the iceberg. Working with our financial institution clients, we have also identified issues with the operational effectiveness of the 1st and 2nd lines of defence models.  In particular, it is evident that the attitude to risk tolerance is unclear and there is a disconnect between the theoretical aspects of risk, board perception and the practical application of operational risk tools and techniques.

“Other elements that contribute to the weak systems of control are a lack of clarity in the lines of defence, including operational risk roles and responsibilities, coupled with the challenges of quantifiably balancing risk versus reward. Key to effecting change will be for businesses to work on embedding operational risk and regulatory compliance systems that assist with cultural change and instil a risk aware attitude through effective risk management systems.”


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