Swedish Regulator Says Banks Need to Sharpen Operational Risk Management

Key Takeaways

• Processes Are in Place, but Not Fully Mature: Banks and credit market companies generally have effective operational risk processes, but weaknesses persist across firms of all sizes.
• Process Documentation Is a Common Weak Spot: Incomplete or outdated documentation of business-critical processes undermines continuity planning and resilience.
• IT Dependencies Need Deeper Understanding: Strong continuity planning depends on a detailed grasp of IT systems, interconnections, and dependencies across key processes.
• Risk Appetite Needs Clearer Anchoring: Subjective operational risk appetites, such as labeling risk as “low” or “medium,” can weaken governance and monitoring.
• Incident Analysis Remains Inconsistent: Some firms lack systematic processes to learn from internal incidents and external events that may signal emerging risks.

Deep Dive

Banks and credit market companies in Sweden have largely effective processes for managing operational risk, but there is still significant room for improvement, according to a new in-depth analysis published Thursday by the Swedish Financial Supervisory Authority.

The report finds that while most firms examined have established routines and frameworks to identify and manage operational risks, weaknesses persist across institutions of all sizes. These gaps, the regulator said, could undermine firms’ ability to withstand disruptions if they are not addressed.

One of the most common shortcomings identified relates to documentation. The authority said that incomplete or outdated documentation of business-critical processes remains widespread, creating challenges for effective continuity planning. Without a clear and current picture of how essential processes function, firms may struggle to respond to operational disruptions in a controlled and timely manner.

The analysis also highlights the importance of a deeper understanding of IT systems and their interdependencies. According to the regulator, robust continuity planning depends on detailed knowledge of how systems, processes, and external connections interact. Firms are expected to maintain strong governance and control over processes that are essential to operations and to be prepared to manage disruptions when they occur.

Risk frameworks were another focus of the review. The authority noted that risk appetite statements, limits, and risk indicators should be closely aligned with the actual risks identified in a firm’s operations. In some cases, however, companies were found to rely on broadly defined or subjective risk appetites, such as describing operational risk as simply “low” or “medium.” The regulator warned that such approaches can weaken governance and make effective monitoring more difficult.

The report also points to gaps in how firms handle incident data. Financial companies are expected not only to analyze internal incidents, but also to monitor relevant external events, which can serve as early warning signals of emerging risks. The authority said it has seen indications that some firms lack fully established, systematic processes for learning from incidents with the aim of reducing future operational risk.

The Swedish Financial Supervisory Authority said it may follow up on individual firms’ operational risk management practices as part of its ongoing supervisory work or through targeted investigations, signaling that the findings could inform future supervisory action.

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