Operational risk transfer

Original operational risk (OR) provisions appeared in CP97 “Integrated Prudential Sourcebook” (PSB) in June 2001 but the Financial Services Authority now proposes that some of its guidance on OR management systems and controls, which covers outsourcing, should go into SYSC (Senior Management Arrangements, Systems and Controls) in order to emphasise the risk that OR management breakdowns present to the regulator’s consumer protection and financial crime objectives; it will bear on nearly all regulated firms, as specified in SYSC1. The guidance on OR identification, measurement, review and control and on firms’ OR policy content that remain in the PSB aims to complement the SYSC provisions. It will apply to a narrower, though still broad set of firms, namely deposit-takers, insurers, investment firms that take principal positions and those investment firms and Lloyd’s agents that hold client money.