Case 3.1 Fake Map or North Star
- Anthony Peccia
- Sep 13
- 1 min read
Updated: Sep 18
If the North Star is what guides the team through unknowns, what do you think the Head of Op Risk is pointing to?
Now that we know what the North Star is, where do we start?
The Head of Op Risk is reminding the team that the ECRG frame work always works, even in unfamiliar territory. That’s why it is the North Star, it provides orientation when the business is new, complex, or ambiguous.
We start with Exposures first, not with documents, not with controls, not with existing procedures.
This case captures a classic operational-risk dilemma: being asked to sign off on a high-risk business expansion without domain expertise, time, or a reliable “map.” The CFO’s fear—that the bank is stepping into oil trading blindfolded—is justified, because this business introduces layers of complexity: physical logistics, volatile pricing, third-party storage, regulatory exposure, and large operational failure points. What stands out is the CRO’s response: instead of panicking, she anchors on the “North Star.” In an operational-risk context, that North Star is the discipline of exposure-based thinking: identify the full set of potential loss types before worrying about controls, processes, or scenarios. Even without oil-trading expertise, a structured MECE-style exposure map lets the team uncover weaknesses quickly—whether in physical handling, settlement,…
The North Star metaphor suggests that operational risk management isn’t just about identifying known risk. It is about having a guiding principle that helps navigate the unknowns. I think the Head of Op Risk is pointing to the framework or mindset that ensures consistency and clarity even when there’s limited information.
They can leverage ECRG to structured think about the new business. What exposure (pysical or intangible) they will face? How to control it and make the residual risk acceptable? How to recovery ASAP when an event occurrs? etc.
Based on the case, I think leveraging the bank's operational risk management framework as the "North Star" to systematically identify, assess, and mitigate the key operational risks of the new oil trading business, adapting the approach as needed is the goal here.