Apologies for the break in updates, I’ve been busy moving from Singapore back to London.

Anyway with year-end approaching fast the need to have a clean balance sheet is rising in controllers’ agendas and the reality that some areas have not had effective controls needs addressing.  I once spent a complete year on cleanups and learned a lot about how to tackle them as they are projects unlike the normal systems and business development.  They are a little like the now notorious Fatburgs that are blocking London’s sewers.  Like the Fatburgs their causes are simple, management didn’t want to ensure that what they sent downstream could be handled and sent it anyway.

• Trading products for which downstream systems cannot support.
• Giving operational and accounting responsibility to under resourced departments.
• Failing to ensure staff have adequate knowledge and training in their duties.
• Failing to upgrade downstream resources for changes in industry practices (like margin reform).

For those being tasked with a cleanup, here’s a guide to the best way to go about it.  The Good Cleanup Guide

ORFs (Operational Risk Frameworks) are now part most big banks’ management of their operational risk.  But they’re not the panacea for all a firm’s operational risk, mostly because they are far too subjective and also struggle to predict the magnitude of a potential loss, for much of the same reasons that operational loss models have lost credibility in the last few years.  But having said all that, they’re better than having not structured framework to assess the operation of process and controls.  Here’s a paper on the topic.