Operational risk key to business success as cyber security and climate change threats increase
Operational risk has become the biggest challenge to businesses, says UCD Smurfit School Professor Andreas Hoepner, who is co-leading a team to launch Europe’s first executive education programme to address it.
UCD Smurfit School Professor Andreas Hoepner speaks to students from the Hong Kong Polytechnic University during the EU Finance Outreach Tour on Sustainable Finance.
In sport, a good attack will give you a head start. But if you don’t have the right defence mechanisms, you leave yourself open to the opposition. In the long run, this will rob you of success. That’s why good attacks win games but good defences win the league.
So says Andreas Hoepner, Professor of Operational Risk, Banking and Finance at UCD Michael Smurfit Graduate Business School. And the same is true of business, he argues.
“If you look at many successful companies, you see that what really drives long-term success is damage control. It’s all about having the right defence mechanisms to respond to the kinds of inevitable risks that we all encounter in the day-to-day.” And the nature of those risks is changing.
According to Professor Hoepner, it is no longer financial but operational risks – failures in our systems, employee error, adverse events that disrupt business procedures – that pose the greatest threat to business today. Chief among these are the risks generated by climate change and cyber security. And he is not alone in his view. The five most likely global risks according to the World Economic Forum’s 2019 report are:
- Extreme weather events
- Failure of climate change mitigation and adaption
- Natural disasters
- Data fraud and theft
- Cyber attacks
“Operational risk has become systemic. That means that it is generalised and not limited to any specific part of your business systems or functions. It affects everything. And in today’s world, the greatest threats are climate change and cyber security – more than market or credit risk, these are the challenges that business leaders need to plan for, contain and respond to effectively.”
For this reason, Professor Hoepner and his colleagues at UCD Smurfit School are launching the Professional Diploma in Advanced Risk Management in Financial Services.
Devised in partnership with The Institute of Banking and corporate partners, Bank of Ireland, Citi and Deloitte, this new programme is “a first,” says Professor Hoepner.
“There are other programmes on the market that address financial and market risk, but none that focus on the raft of operational risks and governance issues that are now facing businesses. We have put this programme together with world-class partners from within the UCD Smurfit School ecosystem, to build real awareness of the wider aspects of risk – and find how to manage them. It’s the first of its kind.”
Launching in Dublin in October 2019, the Professional Diploma in Advanced Risk Management in Financial Services showcases the latest thinking on risk and risk management and is enriched by real-world insights from Citi, Deloitte and Bank of Ireland. It will be delivered on a part-time schedule for maximum flexibility, and to allow participants to put new concepts and understanding into practice in the work place.
Four core modules deliver deep dives into the critical areas of risk assessment, governance and management:
- Risk governance, culture, business and enterprise risk management
- Operational risk and capital markets
- Strategic operational risk, conduct risk and reputational risk management
- Alert models and operational risk management
Participants will come away, says Professor Hoepner, with the understanding, the business tools and the mindset to anticipate and contain threats to their business.
“The programme delivers on both the theoretical and hands-on practical fronts. From a deep understanding of the kinds of operational risks facing Ireland’s banking professionals today – financial crime prevention, external and internal fraud, cybercrime, outsourcing, data protection and more – through to insights into the latest research on AI applications and emerging machine learning models.
“And it builds the kind of knowledge and skills professionals need to capture, report and investigate operational risks, the tools to mitigate them and enhanced business judgement and critical thinking skills.”
While the diploma will be specifically relevant to risk managers and compliance and legal executives, Professor Hoepner stresses that it is also aimed at all risk-related roles in financial services, and at executives or independent board members looking to strengthen their capabilities in operational risk management – a space that is set to grow exponentially, offering unprecedented career opportunities and unparalleled job security.
“Operational risks are the inevitable obstacles that every organisation has to continually manage with accurate, systematic and innovative processes. It is a very exciting area of human study in the increasing age of regulation, digitisation and artificial intelligence. As a financial data scientist I see very little opportunity to replace processing in the complex area of operational risk with machines. In this sense the area of risk management is likely the one with the best job security.”
The UCD Smurfit School is ranked 23rd in the Financial Times' ranking of leading European Business Schools and is the only business school in Ireland, and one of an elite group of schools worldwide, to hold the "triple crown" of accreditation from three centres of business and academic excellence: EQUIS, AACSB and AMBA. UCD Smurfit School’s alumni communities include more than 84,000 professionals around the globe in 35 international chapters.
Applications are now open for the Professional Diploma in Advanced Operational Risk Management in Financial Services which begins in October. Learn more about the programme here.
This article was originally published in the Irish Times