Operational Resilience: Reserve Bank of India's Guidance Note on ORM and OR Series
OR BB RBI Guidance Notes Sec 7-2

[OR] [RBI] [7] Change Management

The RBI’s guidance highlights the critical importance of effective change management in mitigating operational risks. Financial institutions must establish a comprehensive change management process involving all relevant departments and supported by adequate resources. This process should thoroughly assess potential risks associated with changes, such as the introduction of new products, systems, or markets, ensuring that the organization can manage these changes without compromising its operational risk profile.

A robust change management process, led by senior management, should be well-coordinated across all levels of the organization. This includes a comprehensive assessment of risks throughout the lifecycle of any change, from inception to termination. Clear policies and procedures are essential for guiding the change management process, defining roles, responsibilities, and criteria for decision-making. The process should adhere to the three lines of defense model, where business units (first line) manage initial risk assessments, risk management functions (second line) provide oversight, and internal audit (third line) ensures independent review and validation.

To ensure effective change management, financial institutions must allocate adequate resources, including human capital and technology, and implement rigorous review and approval processes. This includes central recordkeeping for tracking changes and monitoring for deviations from expected outcomes. Moreover, change management should contribute to operational resilience by assessing the impact of changes on critical operations and interdependencies. By managing change effectively, financial institutions can mitigate operational risks, improve business performance, and protect their reputation.

Moh Heng Goh
Operational Resilience Certified Planner-Specialist-Expert

Change Management

The RBI’s guidance emphasizes the critical importance of effective change management in mitigating operational risks.

Financial institutions must establish a comprehensive change management process that involves all relevant departments and is supported by adequate resources. This process should thoroughly assess potential risks associated with changes, such as new products, systems, or markets.

Principle 7: Comprehensive Change Management

Senior management ensures a robust, well-resourced change management process effectively coordinated across different organizational levels.

Change Impact Assessment

Product, service, market, process, or technology changes can significantly impact an organization's operational risk profile.

Therefore, change management should comprehensively assess potential risks throughout the lifecycle, from inception to termination.

Policy and Procedure Framework

Financial institutions must have clear policies and procedures in place for managing change.

These should define roles and responsibilities, establish objective criteria for decision-making, and outline processes for monitoring change implementation.

Three Lines of Defence

The change management process should adhere to the three lines of defence model:

  • First Line. Business units are responsible for initial risk assessments and managing change.
  • Second Line. Risk management functions provide oversight, challenge business assessments, and monitor change implementation.
  • Third Line. Internal audit independently reviews the change management process.
Review and Approval Process

A rigorous review and approval process is essential for new products, services, or changes to existing operations. This process should consider inherent risks, impact on the risk profile, necessary controls, and residual risk.

Resource Allocation and Monitoring

Adequate resources, including human capital and technology, must be allocated to support change initiatives.

Monitoring is crucial to identify deviations from expected outcomes and manage emerging risks.

Central Recordkeeping

Maintaining a centralized record of products and services facilitates change tracking and impact assessment.

Operational Resilience

Change management should contribute to operational resilience by assessing the potential impact of changes on critical operations and their interdependencies.

Financial institutions can mitigate operational risks, enhance business performance, and protect their reputation by effectively managing change.

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