The status of people risk management in UK banks

Against the background of a succession of financial mishaps in the banking industry, all deeply rooted in the behavior of individual employees, this paper examines the place of “people risk” in the context of operational risk management in UK banks. Our research is informed by an examination of the literature alongside empirical evidence from 25 semi-structured interviews with operational risk practitioners in UK banks, and we find varying levels of awareness and understanding of people risk. As a result of a regulatory focus on quantitative capital requirements, we also find that management of people risk is subsumed under this regulatory approach, and we find evidence that the “embedded” nature of people risk has hindered the development of a more comprehensive industry-wide approach to people risk management. Nevertheless, some operational risk managers are working more closely with their human resources partners to develop a more cohesive approach to people risk management. In the context of current reforms to the capital requirements for operational risk, it may be an opportune time to examine the regulatory approach to people risk in banks.