Achieving operational resilience in the financial industry: Insights from complex adaptive systems theory and implications for risk management
Abstract
Financial institutions face a perfect storm of nonfinancial risks: climate change, COVID-19, Brexit, digital transformation and cyberattacks generate new threats and exacerbate the impact to existing systemic and organisational vulnerabilities. Regulators recognise the magnitude of the risks that institutions face and are demanding that they become resilient — that is, they are able to absorb, adapt or recover from threats, stressors or shocks. This, however, is more easily said than done. The objective of this paper is to inform senior risk professionals on how resilience might be achieved by providing a much-needed frame of reference for those planning to transform their complex and chaotic organisations to resilient complex adaptive systems. Inter alia we delineate a logical model, based on conceptualising firms as resilient complex adaptive systems (RCASs), which elaborates the necessary and sufficient conditions for resilience in organisations. This general model can be applied to substantive areas of operations within financial enterprises to make them resilient in the face of endogenous and exogenous risk events, while meeting regulatory requirements.
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Author's Biography
Tom Butler is Professor of Information Systems and Regulatory Technology at University College Cork (UCC). His applied research focuses on the application of artificial intelligence technologies for governance, risk and compliance in the financial industry. This was performed in collaboration with global systemically important banks (GSIBs), the RegTech Council and the Bank of England and Financial Conduct Authority (FCA). Recently, Tom was a member of the European Commission’s Expert Group on Regulatory Obstacles to Financial Innovation (ROFIEG). His research publications see him ranked among the top 2 per cent of scientists by discipline globally.
Robert Brooks is a practitioner, thought leader and student of both business transformation and risk management. He is currently the European MD for Integrated Risk Management at Accenture. His career has been focused on business transformation in areas including finance, trading risk management, nonfinancial risk and integrated risk management. He holds professional designations in Management Accounting (ACMA), Risk (PRM) and Financial Risk (CQF Fitch) and has an MSc in Computing (Imperial) and LLB (Hons) (Brunel).
Citation
Butler, Tom and Brooks, Robert (2021, September 1). Achieving operational resilience in the financial industry: Insights from complex adaptive systems theory and implications for risk management. In the Journal of Risk Management in Financial Institutions, Volume 14, Issue 4. https://doi.org/10.69554/OUQJ2151.
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