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New thinking needed – why old approaches tonon-financial risk management (NFRM) and operational resilience must change.

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New thinking needed – why old approaches tonon-financial risk management (NFRM) and operational resilience must change.

By Gaspard BiosseDuplan, Product Head – Sales & Trading at Acin

The risk management discipline is in real danger of failing to see the forest for the trees in the way it talks about non-financial risk management. The debates – often on the “how” and “where” of risk frameworks – are usually grounded in an artificial construct such as organisational structure, lines of defence or regulatory requirements.

Gaspard BiosseDupla

Gaspard BiosseDupla

The reality is that while some individual risks have not changed fundamentally, new risks are emerging all the time, and changing shape.For example,inappropriate conduct risk-related behaviours were observed as early as the 17th century in tulip trading during the “Tulipmania”.On the other hand, most of the IT-related risks, including cyber risk, did not exist 40 years ago. Within ecosystems, risk scenarios evolve organically and develop new relationships with other risks. Risks do not obey the false boundaries that are created to define and manage them.

Instead, the risk discipline should be focusing on the best way to manage NFRM. This involves thinking about non-financial risk in a more connected,innovative and practical way – both within firms and between them – through new, collaborative approaches.

A useful example of the way the discipline has created false boundaries is the Basel Committee on Banking Supervision’s (BCBS’s) definition of operational risk, which is: “the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk, but excludes strategic and reputational risk.”This exclusion of strategic risk and reputational risk, more than 15 years ago, was undertaken because both of these risks were considered too “fuzzy” to quantify, when supervisory and industry focus was on measuring operational risk for regulatory capital calculation purposes.

In 2019, both regulatory and industry focus have shifted away from advanced modelling of operational risk losses for predictive purposes. Now, the discipline is beginning to understand that the relationship between these two risks and all other non-financial risks is very important. In the wake of social media and other online forms of communication, the potential for a reputational risk loss event has grown significantly – social media not only makes reputational damage instantly visible, it also accelerates the growth of thesize of theoriginal risk event loss impact. There is also increasing acknowledgement of the tight interlinkage between levels of non-financial risks and the ability of an organisation to deliver on its strategic goals.

The same holds true for a rapidly developing regulatory focus, operational resilience. The UK’s Financial Conduct Authority (FCA), Bank of England, and Prudential Regulatory Authority (PRA) published a joint discussion paper on this topic, Building the UK financial sector’s operational resilience, in July 2018. To follow up on this, the regulators expect to jointly issue a consultation paper in October. This will include both the regulators’ new policies in this area, as well as their approach to supervising operational resilience.

Other regulatory bodies are also looking at the issue of operational resilience. The BCBS is expected to include material on the topic in its forthcoming update to its 2011 Principles for the Sound Management of Operational Risk. And the US Federal Reserve is also drafting a new document on operational resilience, although the timeline for its publication is not known.

Operational resilience impacts, and is impacted by, all forms of non-financial risk. It’s important for firms to think about operational resilience — the impact that a loss event may have, and how well a firm responds — in relationship with the likelihood of risks materialising. All non-financial risks, such as OpRisk, strategic risk, and reputational risk, should be considered.

Certainly, the regulators are thinking in this connected way. Many of the operational resilience issues that are under the spotlight — such as responding to an IT outage or a data privacy breach — are issues that all firms face, and are a source of potential systemic risk. Regulators are connecting the dots.

For example, at recent hearings in the UK parliament about IT failures at financial services firms, UK regulators talked about how they are now looking at the way in which reputational damage inflicted by social media (say, for example, an IT outage resulting from a cyberattack) could impact a firm’s capital position and liquidity. This is an operational risk loss event morphing into reputational risk via social media. This then transforms into strategic risk and business risk, as well as financial risks such as liquidity risk. The ability of the initial IT outage to roll into other kinds of risks depends on the strength of the operational resilience at the firm.

It is all connected, and this is why Acin is calling for the industry to adopt further the term non-financial risk. Firms need to look at the entire risk picture in a more joined-up way. The risk management discipline needs to turn away from debates about what risk fits where, and instead put its energies into understanding how risk and resilience interconnects, within firms and between firms.

This is why we also believe that now is the moment for firms to embrace collaboration. To truly understand non-financial risk and resilience, financial services firms need to share experiences and best practices with each other.

Regulators are keen to encourage more industry collaboration. For example, in a recent speech, PRA deputy CEO Lyndon Nelson indicated that financial services supervisors would like to see banks collaborate more to protect IT systems and data from either accidental or deliberate damage. Emphatically underscoring the new importance of collaboration was Nelson’s revelation that the Bank of England would be shortly publishing a report that will highlight the importance of collaboration among financial services firms around resilience issues.

Regulators are also looking at resilience metrics. For example, in the BCBS update to its 2011 Principles for the Sound Management of Operational Risk,the body stated it is planning to include a set of metrics for operational resilience around IT outages. In the UK, Nick Strange, the Bank of England’s director of supervisory risk specialists, has said regulators are thinking about demanding that firms set a specific “tolerance for disruption – in the form of a specific outcome or metric” to strengthen approaches to operational resilience. Examples include “the proportion of payments made; the number of customers affected; [and] the maximum allowed time for restoration of a business service.”

Clearly the majority of non-financial risk – and especially operational resilience – is not a source of competitive advantage for firms – the regulators are implying this through their calls for increased collaboration. Their belief – as well as ours – is that proactive collaboration among firms would strengthen the entire financial system, potentially making all collaborating firms more resilient and benefitting the industry as a whole.

Getting industry-led collaboration right will make all firms stronger and enable constructive dialogue with the regulators about operational resilience, as well as non-financial risk management. Acin is committed to enabling the industry to collaborate through its unique Networked Defence Model, which is bringing the industry together into a growing network of firms who work together to enhance their risk and control environments.

Through the Networked Defence Model, financial services can be transformed from a control ecosystem within each bank that is only as strong as its weakest link, to one that is as robust as the Community’s strongest link.

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U.S. inauguration turns poet Amanda Gorman into best seller

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U.S. inauguration turns poet Amanda Gorman into best seller 1

WASHINGTON (Thomson Reuters Foundation) – The president’s poet woke up a superstar on Thursday, after a powerful reading at the U.S. inauguration catapulted 22-year-old Amanda Gorman to the top of Amazon’s best-seller list.

Hours after Gorman’s electric performance at the swearing-in of President Joe Biden and Vice President Kamala Harris, her two books – neither out yet – topped Amazon.com’s sales list.

“I AM ON THE FLOOR MY BOOKS ARE #1 & #2 ON AMAZON AFTER 1 DAY!” Gorman, a Los Angeles resident, wrote on Twitter.

Gorman’s debut poetry collection ‘The Hill We Climb’ won top spot in the online retail giant’s sale charts, closely followed by her upcoming ‘Change Sings: A Children’s Anthem’.

While poetry’s popularity is on the up, it remains a niche market and the overnight adulation clearly caught Gorman short.

“Thank you so much to everyone for supporting me and my words. As Yeats put it: ‘For words alone are certain good: Sing, then’.”

Gorman, the youngest poet in U.S. history to mark the transition of presidential power, offered a hopeful vision for a deeply divided country in Wednesday’s rendition.

“Being American is more than a pride we inherit. It’s the past we step into and how we repair it,” Gorman said on the steps of the U.S. Capitol two weeks after a mob laid siege and following a year of global protests for racial justice.

“We will not march back to what was. We move to what shall be, a country that is bruised, but whole. Benevolent, but bold. Fierce and free.”

The performance stirred instant acclaim, with praise from across the country and political spectrum, from the Republican-backing Lincoln Project to former President Barack Obama.

“Wasn’t @TheAmandaGorman’s poem just stunning? She’s promised to run for president in 2036 and I for one can’t wait,” tweeted former presidential candidate Hillary Clinton.

A graduate of Harvard University, Gorman says she overcame a speech impediment in her youth and became the first U.S. National Youth Poet Laureate in 2017.

She has now joined the ranks of august inaugural poets such as Robert Frost and Maya Angelou.

Her social media reach boomed, with her tens of thousands of followers ballooning into a Twitter fan base of a million-plus.

“I have never been prouder to see another young woman rise! Brava Brava, @TheAmandaGorman! Maya Angelou is cheering—and so am I,” tweeted TV host Oprah Winfrey.

Gorman’s books are both due out in September.

Third on Amazon’s best selling list was another picture book linked to politics and projecting hope: ‘Ambitious Girl’ by Vice-President Kamala Harris’ niece, Meena Harris.

(Reporting by Umberto Bacchi @UmbertoBacchi, Editing by Lyndsay Griffiths. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)

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Why brands harnessing the power of digital are winning in this evolving business landscape

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Why brands harnessing the power of digital are winning in this evolving business landscape 2

By Justin Pike, Founder and Chairman, MYPINPAD

Delivery of intuitive, secure, personalised, and frictionless user experiences has long been table stakes in digital commerce, well before the era of COVID-19. As businesses harness the revolutionary power of digital technologies, they have pursued large-scale change to adapt to evolving consumer preferences (some more successfully than others, but that’s a blog for another day). Digital transformation is a term we hear repeatedly, and it looks different for each organisation, but essentially, it’s about utilising technology and data to digitise, automate, innovate and improve processes and the customer experience across the entire business.

As I said, this was already well underway but then came 2020 and no industry escaped the disruption of the coronavirus outbreak, which has had an indelible impact on businesses performance, operations, and revenue. Regardless of whether the impact of COVID has been very positive or very challenging, it has forced organisations globally to re-evaluate and re-orient strategies to adapt.

As lockdowns and pandemic-related restrictions continue to change daily life, this raises the question of how we can balance a dramatic shift to digital and the benefits it brings, while ensuring business continuity and innovation both during and post-COVID, and protecting everyone against fraud?

Digital is an essential survival tool, and even more so in a COVID world

No one could have predicted the dramatic digital pivot that has taken place over this year. Indeed, within weeks of the COVID outbreak cash usage in the UK dropped by around 50%. Digital solutions including delivery applications, contactless payments, mobile commerce, online and mobile banking have become essential components of a touchless customer experience in the era of social distancing. It’s no longer just about an enhanced and superior customer experience, it’s also about health, safety and survival.

In store, businesses have benefited from contactless payments enabling faster throughput and reduced need for consumers to touch payment terminals (therefore requiring greater cleaning, which degrades the hardware much faster). Mastercard reported a 40% increase in contactless payments – including tap-to-pay and mobile pay – during the first quarter of the year as the global pandemic worsened. Digital has also become an essential sales channel for many B2C brands. Where brick and mortar stores have been required to close, digital commerce enables continuity of customer relationships and revenue. This channel also provides brands with rich customer data, which can be used to enhance and personalise the customer experience and typically results in greater levels of engagement and uplifts in revenue.

Industry forecasts estimate that worldwide spending on the technologies and services enabling digital transformation will reach GBP 1.8 trillion in 2023 – a clear indication that the process represents a long-term investment and a global commitment to digital-first strategy. The key point here is that digital brings significant benefits, and regardless of COVID, is here to stay.

The challenges that rapid digital transformation brings to businesses

Justin Pike

Justin Pike

Regardless of whether businesses are operating in developed or less-developed economies, these times of crisis have levelled the playing field in the sense that all businesses are facing similar issues. Access to products and supplies, maintaining customer relationships, accelerating sales for some and declining sales for others, health and hygiene are just a few of the unique challenges brought about by COVID.

Many businesses in physical environments have had to swiftly implement changes to significantly reduce safety risks for staff and customers, such as contactless payments, mobile ordering and delivery options. But with these changes come a host of other benefits of digitisation, such as faster transactions, and reduced human error at the point-of-sale.

The reliance on technology, however, can also expose organisations and consumers to certain vulnerabilities. In particular, the risks of fraud and cybercrime have dramatically increased since the onset of the pandemic as scammers have taken advantage of digital technologies to target both businesses and individuals.

As a McKinsey report illustrates, new levels of sophistication in the activities of fraudsters have placed more pressure on companies that have been previously slow to go digital, bringing “into sharp relief how vulnerable companies really are”, and damaging the financial health of small and large businesses. In fact, the Bottomline 2020 Business Payments Barometer reveals that only one in 10 small businesses across the UK report recovering more than 50% of losses due to fraud.

But take these stats with a grain of salt. While it is important to be aware of the risks and challenges this new business landscape brings, it’s equally as important to have a lens firmly across your own business, industry and audience, and to identify the changes you can make internally to mitigate risk as well as improve your customer experience. Where can you make some quick wins? Do you have the right skillsets internally to achieve what you need to achieve? What technology is out there that will enable your business goals? There are tech companies like MYPINPAD that are making huge strides in software development, which will transform businesses globally.

A digital world post-COVID

Almost a year in, the line between business success and failure remains fragile. However, an ongoing transition towards greater digitisation will be the difference between survival and the alternative.

There is a wide range of initiatives businesses can implement to weather this storm. If we look at the space MYPINPAD operates within, secure digital consumer authentication is crucial to the ongoing success and security of not only financial products but also identification and verification across a range of different industry verticals. Shifting the authentication of consumers securely onto mobile devices enables businesses to completely reshape their customer experiences. By bringing together a more seamless, frictionless customer experience, accessibility, privacy, security and access to consumer data, businesses are able to drive digital transformation across day-to-day activities.

Against this backdrop, software with stronger security standards continue to play an ever more vital role in supporting society, protecting consumers and businesses from the increase in risks that rapid digitisation brings. Already, merchants can deploy PIN on Mobile technology from companies like MYPINPAD, onto their smart devices to speed up the digitisation process many are now tackling.

Essentially, opening up universal payments and authentication methods that feel familiar, for both online and face-to-face transactions, will be key to opening up a world of possibilities when it comes to redefining how businesses engage with consumers.

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Brexit responsible for food supply problems in Northern Ireland, Ireland says

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Brexit responsible for food supply problems in Northern Ireland, Ireland says 3

LONDON (Reuters) – Food supply problems in Northern Ireland are due to Brexit because there are now a certain amount of checks on goods going between Britain and Northern Ireland, Irish Foreign Minister Simon Coveney said.

British ministers have sought to play down the disruption of Brexit in recent days.

“The supermarket shelves were full before Christmas and there are some issues now in terms of supply chains and so that’s clearly a Brexit issue,” Coveney told ITV.

The Northern Irish protocol means there are “a certain amount of checks on goods coming from GB into Northern Ireland and that involves some disruption,” he said.

(Reporting by Guy Faulconbridge; Editing by Tom Hogue)

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