To encourage banks to focus attention on assessment of operational risk on products and processes, regulators should be aware of new products, improvements in management information systems and computing technology that have opened the way for improved operational risk measurement and  BIS Review 88/2005  1  management. In the next few years, financial institutions and their regulators will continue to develop various approaches for operational risk management and capital budgeting techniques. 5. Let me focus on some key areas of operational risks and regulatory responsibility in the interest of financial system stability. 6. Sound management of operational risk is particularly important in payment, clearing, and settlement systems as such risks can spread across systemically. All owners and operators of payments, clearing and settlement systems face operational risks but the degree may vary from system to system and from country to country. Operational problems in a payment, clearing, and settlement system may impede the control of, or even exacerbate, other types of risk such as market, liquidity, or credit risk in an unanticipated way that could pose a systemic risk, resulting in participants incurring significant losses. It may not stop there. Payment and settlement related operational risks could filter into businesses of banks’ clients, governments and the country’s international correspondents as well. This aspect of banking operations was ignored for many years and it is fairly recently that regulators and banks started addressing payment and settlement related operational risks.

This includes the implementation of mandatory climate-related disclosures by various governments, regulators and independent bodies to hold companies accountable for their impact on the environment. The world is clearly moving more aggressively on building climate resilience in what is being described as the “decisive decade for climate action". Individual countries and firms cannot stand still. Not just because climate change has severe implications at a domestic level – more so for developing countries – but because global climate actions affect us directly through economic and financial linkages. How we respond is crucial. With the growing traction to sustainability, the 1/5  BIS central bankers' speeches  risk of stranded assets is real and significant. The risk of getting left behind and shut out of key markets will affect our economic competitiveness, lead to a drop in growth and worsen existing inequalities. Ultimately, it is at the local level that the effects of climate-change will be mostly felt – through its transmission to food supply, energy and transport, disease and livelihoods. It is therefore in our collective interests and responsibility to act now, and to act together. As the lifeblood of the economy, the response of the financial sector is crucial on several levels – (i) to safeguard the resilience of the financial system through the identification and management of climate-related risks; (ii) to direct financial flows to low-carbon activities; and (iii) to support the transition by economic agents through appropriate financial and risk solutions.