IS/IT Risk Management in Banking Industry

Vlasta Svatá,Martin Fleischmann

doi:10.18267/j.aop.334

Abstract

The paper makes a survey of current trends in business risk management focusing on IS/IT risk management in financial institutions. Special attention is paid to frameworks and regulations available for both financial and non-financial risk management and their relation to IS/IT risk management. The relationship and common and different features between IS/IT risk management and operational risk management are discussed on the basis of a short introduction to the specifics of risk management in financial institutions. The advantages and challenges of those different frameworks are summarized together with the possibility to incorporate some IT/IS risk management tools and methods into operational risk management in practice. Basel II is the main framework covering the area of operational risk management, therefore the paper focuses on the assessment of the impact and integration of the Basel II framework with IS/IT risk management ones.

Highlights

Headlines related to the financial crisis highlighted that significant risk failures persist despite the investments in the risk assessment and risk management disciplines
The current financial crisis may be regarded as an opportunity to correct certain aspects of financial systems, namely those that had led to it
As the crisis proved to be very serious and has definitely not finished, its reasons are being intensively discussed. They are often identified as the shortcomings of risk management systems on the one hand and insufficient regulation on the other

Summary

Introduction

Headlines related to the financial crisis highlighted that significant risk failures persist despite the investments in the risk assessment and risk management disciplines. Various experts and professional organizations dealing with risk management have come to the conclusion that the failures may be caused by a mess in the risk information due to different risk assessments from different perspectives The credit crisis and the resulting regulatory pressure forced the chief operating officers and senior management of financial services firms to focus more on risk convergence - the assessment, mitigation and reporting of risk. Risk management is an evolving discipline that goes at disparate maturity levels across organizational disciplines such as internal audit, business operations, information technology and finance. 2. Risk assessment should answer the following five questions

Emergence of risk-based approaches

Depth of coverage of IT

Completeness of risk management scope

Objectives

Completeness of risk management scope and regulation in banking industry

Conclusion