4 March 2008

Detica Group plc (DCA.L), the specialist business and technology consultancy, is urging investment banks to think again before burdening their business lines with ever-tighter controls in order to avoid incidents involving rogue trading and operational failure.

In a white paper published today, Detica argues that the traditional tightening up of the existing control framework is not the answer. As Simon Elkington, Executive Manager from Detica's Investment Banking unit, comments: "Not only does this impose an ever-increasing burden of cost and complexity on the bank but, more worryingly, it generates a false sense of security".

Instead, Elkington argues, banks should adopt a networked operational risk model that moves beyond traditional silo-based approaches to risk management. "Once separate business, technical and physical controls are linked together then fraudsters and abusers are confronted by a tight web of interconnected defences, each one reinforcing and being reinforced by its neighbours".

With a networked control model in place, Elkington goes on to argue that banks can take a more proactive approach to identifying operational failures by deploying advanced information intelligence systems that identify anomalous patterns and behaviours at a much earlier stage than is currently the norm.

Elkington concludes that the circumstances that have led to recent operational losses are typical of any number of banking institutions and are likely to happen again. "Banks who believed, post-SOX and Basel II, that regulatory compliance, internal controls and surveillance could be put on the back burner must think again", he warns.

Sally Clift or Rachel Ringstead Porter NovelliTel: +44 (0)207 853 2222email: or