SRA-E Lisbon 2017

The significance of operational risk in banks has for some time attracted attention as a result of high profile and costly risk failures. Traditionally, banks, along with much of the academic research in the area, have largely concentrated on the most measurable elements of operational . However, this has resulted in the relative neglect of a key element of operational risk; people risk, despite the fact that, most operational risks are ultimately the result of ‘people’ failure, whether at strategic, managerial or operational level. Th e current paper attempts to address this neglect by examining people risk in the context of operational risk management in UK banks. Through interviewing operational risk managers, senior financial institution operatives and operational risk consultants working in financial institutions, the paper investigates how banks incorporate the practices, processes and techniques employed in people risk management into their overall operational risk management processes and systems. The results show that, whilst banks are exposed to operational risk as a result of people at divisional, institutional and top management level, the skillset, structures, processes and practices for managing people risk are still in their infancy. The results also suggest a potential framework for people risk management which has implications both for the three lines of defence approach adopted by many banks, as well as for their human resources policies.