Page 20 - Risk Management Bulletin Jan- Mar 2022

RMAI BULLETIN JANUARY - MARCH 2022

BIS paper of June 2011 was published with a heading the organization if a new platform is launched for
" Basel III: A global framework for more resilient banks ease of functioning or to enhance the customer
and banking systems" The reforms focused on experience it is very important that it is approved
improving quality of regulatory capital , increasing the by the appropriate committee and put through
level of capital , specifying minimum leverage ratio and use test so that the transition is smooth.
introducing the concept of liquidity coverage ratio
Ransomware attack: Such attacks have brought
(LCR) and Net stable funding ratio ( NSFR). The focus
the biggest and the best of organization to a
here was on building financial resilience.
standstill. A ransomware attack can lock a
computer, encrypt important files and the attacker
The supervisory role was also broadened with the
seeks ransom for granting access to your system
introduction of Supervisory Review and Evaluation
and files.
Process (SREP). In the changed scenario non-financial
Climate change: Climate action failure and
risk also became important as the supervisors and
extreme weather have been identified as the top
regulators focused on assessing the risk culture,
global risks. It is a growing concern for not only
governance, and compliances. The supervisory stance
governments but businesses too. The unchecked
is stricter globally and financial institutions have been
growth through businesses is one of the reasons
fined for noncompliance, Not having a good risk
for the extreme shift experienced in the climate.
management systems and Governance . The latest
The transition has been far too slow than desired.
being the case of Citigroup being fined in October 2020
Climate action required bringing down the carbon
for deficiencies in Risk Management and internal
emission and temperature to 1.5°C whereas
controls.
globally we are still at 3°C. In the given
circumstances if governments and organizations
Thus, it is important for every organization to take note
decide to go for sudden transition it may have
that, the pace of environmental changes and
impact on certain industries but the economic
technological development is faster than development
damage would be less as the long-term impacts
of risk management tools which makes the task of
can be limited. However, the longer it takes to
being resilient more pertinent.
move to green scenario the severity or the
Current scenario in Financial sector: impacts of incidents like the hurricane, storms,
floods will continue to increase over time leading
To keep pace with the technological changes, increased
to economic damages as well.
consumers demand for easy and instantaneous access
to the services, shift to fintech (financial technology) Thus, organizations will be faced by either the
has made it necessary to outsource activities and transition risk or physical risk. The Pacific Gas
increased reliance on technology. The topmost &Electric case is a first climate change bankruptcy
Operational risk being IT Disruptions and Data declared in 2019, where the company was held liable
Management. for non- adherence to the laid down standards ( as
the fire was caused due to failure of a transmission
Some of the major incidents which have line for which standards were not adhered to). Dam
had a huge impact not just in financial collapse in Brumadinho (Brazil), in 2019, is one of
the worst industrial accident as tons of toxic mining
terms but non-financial:
waste flowed out in the areas nearby (Normally
Banking information - technology (IT) failures like
these mining dams are built of mining waste itself).
that of TSB Bank when it separated from Lloyds
The company is facing charges of murder along with
Bank and moved on to a new platform. The
environmental charges as it failed to report warning
customers were unable to carry online
signs.
transactions and wrong balances were being
Current outbreak of the corona virus: The impact
reflected in their accounts. Thus, organizations
of COVID 19 has led to less in-person interaction
undergoing the process of mergers and
acquisitions can face such a situation. Even within which has increased the pace of the shift to digital

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