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Risk Management
Total risk management is the combination of all the elements of risk management into a consistent strategy...
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Training - Commercial Banking
How to manage Operational Risk:
2 days
Course Highlights
* Identify and define the boundaries of operational risk
* Understand specific risks in financial institutions and
their impact on operational efficiency
* Examine some of the models
* Identify solutions and tackle line management, internal
control and the effect of human error
* Implement IT solutions to mitigate operational risk
Course outline
Operational risk – what is it and why does it matter?
Factors influencing the importance of operational risk
- Market consolidation and margin squeeze
- The complexity and sophistication of IT systems
- Regulatory and risk capital allocation pressures
- Hidden risks posed by complex financial products
- Improved communications and reliance upon efficient IT
systems and STP
Risks identified and defined
- Fraud
- Systems and operations
- Communication
- Documentation
- Delivery and settlements – matching the ‘book’
Specific risks
- Technology
- Systems failure
- Programming errors
- Telecoms
- People
- Incompetence
- Fraud
- Process
- Execution error
- Booking error
- Transaction and mis-matching of trades
Discussion: Barings, Sumitomo, Orange County, BT – could one
put a capital charge against these human and systems errors?
Could they have been prevented through better measurement?
Whose responsibility is operational risk?
- Organisational group risk – policy setting
- Internal audit - assurance
- Operations – execution
- Traders
- Front, middle, back office
- IT
Can operational risk be measured?
Understanding the models – the ‘quantitative’ approach
- The major models
- Back-testing
- High impact/ low probability
- The PandL
- Extreme value theory
- Impact probability matrix
- Risk capital allocation and the Basle debate
- Qualitative Issues
- Limitations of models and metrics in measuring risk
Where next? Doing something about it
Generic approaches
- Do nothing
- Insurance
- Risk profiles mapping
- MIS
- Straight Through Processing
- Processes and controls
- Overcoming data incompatibility
- Systems reconciliation
Soft issues
- Building risk awareness culture
- Building consensus on risk allocation policies
- Building sense of responsibility for risk reduction
- Overcoming resistance to change and establishing clear,
straight-through communication channels
- Corporate governance
Identifying and tackling line management issues
- Assessing the level of senior management buy-in to
operational risk solutions
- Understanding reporting lines and roles/ responsibilities
- Implementing effective management control
- Empowerment and staff control
Case study: Illustrating and applying the potential risks and
options for mitigating, reducing and avoiding catastrophic
impact events in a merger environment
Working through the framework – 4 stage process
Case Stage 1: Understanding how the new operational risk
environment might look
- Covering the period after the offer announcement
- Using organisational charts and skills matrix
- The importance of understanding the trading functions
coverage
- Which offices responsible for which functions?
- Systems map and assessment
- Take-over rules – ensuring information security
Case Stage 2: understanding the new operational risk
environment
- Covering the period after the offer is agreed
- Matching of people
- Matching of systems
- Assessing how the support function will work
Case Stage 3: Living with the new operational risk environment
- Short-term - surviving the first few months
- Making the two firms work
- Taking on the trading books
- Getting the systems to communicate and work in tandem
- Living with multiple back-office and front-office systems
- Living with multiple processes
- Linking switchboards, networks and email
- Politics
- Dealing with resentment, dismissals/ redundancies
- Keeping the systems running
Case Stage 4: Designing and building a better operational risk
environment
- Longer-term - integration and rationalisation
- Process re-engineering and streamlining processes
- Removing duplication
- STP projects
- Systems design and end-user considerations
- Single back office and front office
- Overcoming resistance and introducing training strategies
- Project planning, budgeting and communications
- Assigning responsibility for risk policy
Course Fees
VAT to be included at the local rate, if applicable. Costs
shown are per delegate inclusive of refreshments, lunches and
seminar materials. Cost of accommodation is not included.
GBP 2500
Certificates of Participation
Certificates of participation are remitted to course
participants upon request. |
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