Operational Risk Management
Ariane Chapelle, Wiley, 2019
Condensing 17 years of practice experience in the discipline and academic theory, Dr Chapelle has created an ‘all-in one’ guide to every aspect of financial operational risk. The author dives straight into the concepts of what risk is in its most basic form, then builds layer by layer into a comprehensive guide, explaining the relationship of each element, history where relevant and reasons for evolution, bringing the reader up-to-date with current best practice and theory. At no point is a prior knowledge of the areas or its jargon assumed, and in a meticulous fashion the author creates a journey that ends with a thorough overview and tackles each element one by one.
The areas of risk identification, assessment, mitigation and monitoring are surely introduced, and then the rising risks associated with operations in the modern world are explored from cyber to reputational risk. A short conclusion covers the latest ideas in behavioural science, technology and a hope that risk management can transcend its roots to become an effective enabler of good governance.
Case studies from across the financial services are used, and where possible details are used to help add context – an example is where scenario assessment is discussed, the purpose and objectives of using assessment are explained (to cover operational losses to 99.9%) how each driver is quantified, the operational risks detailed and both the ongoing mitigation plans as well as the financial analysis itemised line by line. Short, simple and thorough. In this case the Monte Carlo simulations are drawn out into a table to convert the scenario described from a theoretical outline to hard figures.
In another case study on cultural change a more qualitative review of messaging and values is explored, explaining how progress was made to embed new behaviours, how influencers were used to acquire change, and how the softer skills of changing an environment were harnessed to drive the desired result. The use of such examples prevents the book from becoming too ‘theoretical’ and grounds the subjects being discussed, allowing the reader to see how ideas can be translated into practice – and to some extent letting one see just how wide a discipline this is.
And that might be enough to recommend it, but in addition, this reviewer at any rate, found Dr Chapelle’s writing style to flow easily and have a refreshingly open style, as if she is casually chatting with the reader whilst imparting knowledge.
Such an endeavour could easily have become overladen with dense text and anecdote, but thankfully the text is well trimmed, with illustrations and boxed out case studies that help underline the relevance of the topics of discussion. Helpful, witty and insightful quotes adorn the pages, and help remind us that risk management is everywhere around us in different ways. With a logical and clean layout, and the use of diagrams and models to help make the complex issues tackled simpler and easier to remember. If there is a criticism it is that in a book retailing at £40 the diagrams and reproductions could be graphically clearer, but this is a minor quibble when it is the content that matters.
For those long schooled in risk, the book provides a welcome reminder to the importance and development of the discipline. For those who are students, it is a solid foundation and guide. Either way, it is a sound investment for the bookshelf.
This book review was published in the January 2019 issue of CIR Magazine.
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BOOK: Operational Risk Management, by Ariane Chapelle
Operational Risk Management