Nicolas Renard January 7, 2021

Top 10 insights of 2020

What are our most popular insights of the past year?

This is it. 2020 is now behind us.

To help you start 2021 off on the right foot, we have consolidated the following summary on the basis of the 10 most liked posts, on content that Chapelle followers found to be the most helpful or insightful.

We shared a lot of these insights on our Chapelle Linkedin page and will continue to do so in 2021.

Should you need further guidance or support, do not hesitate to contact us via our website.

1. Climate-related and environmental risks: ECB guide and progress report

Before COVID-19 took centre stage in the short-term priorities of most firms, 2020 had started off with climate-related and environmental risks dominating all of the top 5 places of World Economic Forum’s annual Global Risks Report 2020.

2020 remained a key year for climate risk over a longer-term horizon, with the additional perspective of a green recovery to the economic crisis. In Europe, the financial sector has a key role to play through the European Green Deal. In a guide published in November 2020, the European Central Bank (ECB) listed its 13 expectations on how institutions are expected to consider climate-related and environmental risks. ECB also issued a progress report, showing that there is still a long way to go for institutions to reach the minimum level of disclosures set out in the ECB guide or in other EC guidelines or TCFD recommendations.

 

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2. Article: Black Swans, Gray Rhinos, White Elephants

2020 was also the year where the term Black Swan, coined by Nassim Nicholas Taleb, was used erroneously (with the author’s own confirmation) to describe the COVID-19 pandemic.

What are the characteristics of a Black Swan? What is a Gray Rhino? How do both animals compare to While Elephants? How should these 3 metaphors of disruptive risks be incorporated by Boards of Directors in their oversight of the risks facing their organisations? A brilliant article published in January 2019 by James Lam that we reviewed in the lens of the 2020 events, perfectly addresses these questions in detail.

 

3. Case Study: End-to-end RCSA for a European financial institution

Risk and Control Self-Assessments is a key tool in the risk manager’s toolbox. Yet we have observed that their deployment presented challenges in organisations still maturing in risk management, when their outcome wasn’t simply underused. Done well, a RCSA exercise is an opportunity to improve an organisation’s overall risk culture and to give back to risk managers the place they deserve in supporting the business in making the right decisions. Please find below an example of a large-scale end-to-end RCSA we successfully deployed for a European financial institution from June 2019 to June 2020 (with other RCSA exercises also ongoing for clients of the non-financial sector).

 

4. OpRisk Awards 2020: "Operational Risk Management - Best Practices in the Financial Services Industry" Book of the Year

In June 2020, for the second year in a row, Chapelle has been honoured by an OpRisk award (Risk.Net). After the “Outstanding Achievement of the Year” award in 2019, it was this time our founder Ariane Chapelle to be recognised with the “Book of the Year 2020” award, for her best-selling book Operational Risk Management – Best Practices in the Financial Services Industry (Wiley) and its 2020 French translation: Gestion des risques opérationnels – Guide des meilleures pratiques en banque et assurance (Pearson).

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5. Governance: New IIA Three Lines Modes

On 20 July 2020, the Institute of Internal Auditors published an important update to its widely implemented Three Lines of Defense (3LOD) model.

This new Three Lines model is no longer about defense only, and adds flexibility in the way the second line performs its duty, clarifying its various responsibilities, including the very important “Support” responsibility dear to our heart.

 

6. Culture: Basel Committee recommendation on risk training

On 6 August 2020, the Basel Committee on Banking Supervision released consultative documents on “Principles for Operational Resilience” and “Principles for the Sound Management of Operational Risk” (PSMOR). Consultation period ended on 6 November 2020, so we expect official updates in 2021, on which we’ll of course come back for you on both documents. In the following post, we reviewed already the recommendation of the Committee on the critical aspect of “risk training”.

 

7. Governance: Basel Committee principle on risk appetite

Still in August 2020 as part of the consultative document on the “Principles for the Sound Management of Operational Risk” (PSMOR) issued for comments by the BCBS, another principle addressed to the Board of Directors that we reviewed was the one dealing with their approval and periodical review of their institution’s risk appetite, also a topic which remains from our experience a struggle in many organisations.

 

8. Case Study: ERM approach for a public sector organisation shortlisted at CIR Risk Management Awards 2020

In September 2020, our ERM approach for a client of the public sector was shortlisted for the CIR Risk Management Awards 2020, in the category “International Risk Management – Public Sector”. Discover how we guided the Regulatory Body for Railway Transport and Brussels Airport Operations in the implementation of an ERM approach proportionate to their specific needs.

 

9. People: the 7 dimensions of Risk Culture

How important is Human Capital in Risk Management? This is the question addressed by Amédée Prouvost, Chief Operational Risk Officer at the World Bank, in an exclusive webinar we organised to celebrate the 1st Anniversary of Chapelle Belgium, in October 2020.

Amédée Prouvost embarked us “on a journey from Risk Governance to Risk Culture”, in his own terms, presenting his practical experience and perspectives on 7 key dimensions which enabled to foster a healthy Risk Culture at the World Bank. Discover each of these 7 dimensions and what they cover by watching the following recorded webinar on our website.

 

10. Disclosures: Operational risk disclosures lag towards Basel IV requirements

We closed the year with the publication in December 2020 of an article in the Enterprise Risk magazine by David Lannoy, our Director of Risk Training & Practices, teaming up with our consulting intern Camille Fradin. They conducted a research and developed a methodology to assess, for 5 specific dimensions, the status of operational risk disclosures from 18 banks (in Belgium, France and Luxembourg) towards the pillar 3 disclosure requirements of Basel IV to be implemented in January 2023.

If the governance dimension scores well for most of the analysed banks, improvements are needed for some of the institutions in terms of operational risk design and measurements. Last but not least, the risk response and risk reporting dimensions are those where most work is needed for all banks of the analysed sample. Read on the full article for details and a proposed approach to tackle the possible gaps in an effective manner.