OPERATIONAL RISK MANAGEMENT AND MODELING
- Exhaustive reading material covering the detailed sections outlined below
- Practical hands-on Risk Modeling and Analytics useful for careers in Operational Risk Management
- Identify the sources of operational risk and how these arise within the context of financial institutions main business activities.
- Understand the governance structures, systems, procedures and cultural aspects necessary for an organisation to successfully manage operational risk.
- Build a knowledge of the main techniques for the measurement and quantification of operational risk and their relative merits and drawbacks.
- Appreciate the approaches available to a bank under Basel III for the calculation of regulatory capital for operational risk and the supervisory requirements for each approach.
WHO SHOULD ATTEND
This course is aimed at those who wish to explore the more advanced aspects of Operational Risk Management to build a career in the below areas:
- Section 1 - Foundations of Operational Risk
The aim of this section is to understand the nature of operational risk, identify typical occurrences of operational risk within a bank’s business model, and to consider external perspectives on the importance of operational risk management in rating and banking supervision. This section also looks at the key role of the board in setting an organisation’s operational risk policy and the key characteristics of how it is implemented.
Introduction to Operational Risk
- Importance of Operational Risk as part of the firms risk inventory
- Understanding the nature of operational risk
- Current industry drivers of increasing operational risk in financial institution, complexity, innovation, technology, transaction velocity and litigation
- Motivations to manage operational risk: financial loss, legal and regulatory requirements, reputational risks, capital management and planning
- Management perspectives/requirements; understanding the risk, information systems, quantification, mitigation and hedging decisions, cultural and behavioural aspects
Identifying categories of operational risk in financial institutions
- Core operational capacity
- People risks
- Client relationships & Fiduciary risks
- Transactional systems
- Safe custody
- Reconciliation and reporting
- Legal risk
- Change and new activities
- Expense volatility
Operational Risk Governance
- Risk management process – Operational risk as an integral part of the enterprise risk management framework
- Operational risk policy – the key components of an organisation’s risk policy.
- Roles and responsibilities - of the board, senior management and support functions.
- Evaluating corporate governance standards
- Operational risk framework – how the components of operational risk management fit within strategy and risk policy.
- Operational risk cycle – the components of the risk cycle: identification; assessment and measurement; mitigation and management; monitoring and reporting.
- Section 2 - Management of Operational Risk
The objective of this section is to consider the main techniques used to identify and to manage operational risks, within a financial institution environment.
Understanding the firm’s operational risk profile
- Objectives of operational risk management
- Risk profiling
- Risk control and self-assessment analysis
- Key risk indicator analysis
General Operational Risk Management Techniques
- Internal data collection, parsing and emerging risks identification
- Use of external event data
- “Lessons Learned” processes
- Scenario analysis techniques
- Impact of new products, processes, business lines & locations
Specialist Operational Risk Management Areas
- Objectives and good practice in the management of Legal Risk
- Fraud and Anti-Money Laundering requirements
- Business Continuity Risk
- IT Infrastructure Risk
- Section 3 - Operational Risk Measurement
The aim of this section is to explore the main techniques which are applied with the financial services industry to quantify operational risk, their relative strengths and weaknesses, and also to consider the problem of “unquantifiable” aspects to operational risk measurement.
Quantifying Operational risk
- Steps involved in quantifying risks
- Approaches to measuring operational risk; expense-based, income volatility, top-down and bottom-up modelling approaches.
- Operational risk databases
- Measurement Techniques - Probability & impact matrices.
- Scoring risk impacts
- Determining loss distribution
- Aggregating operational risk
Operational Risk VaR Measurement
- Calculating unexpected versus expected loss
- Operational VaR models
- Section 4 - Operational Risk Measurement – Regulatory Capital
This section aims to demonstrate how the management and measurement techniques explored in the previous sections are applied by the Basel II and III capital accords.
Regulatory Charges for Operational Risk
- Capital charge and RWA under Operational Risk
- Fundamental Basel approaches for operational risk capital requirements
- The Basic Indicator Approach
- The Standardised and Alternative Standardised Approach
- The Advanced Management Approach (AMA)
- Regulatory criteria for adoption of Standardised and AMA approaches
- Pillar 2 and Pillar 3 requirements for operational risk
The Advanced Management Approach
- Classification of risks under the AMA
- Qualitative risk management standards
- Quantitative system and data standards
- Typical methodologies and system architectures employed under the AMA
- Section 5 - Operational Risk Mitigation
The final section explores the various techniques and methodologies that could be used to mitigate Operations risks.
Mitigation of residual operational risks
- Outsourcing: typical outsourced operations, gains and losses in terms of organisational risk profile
- Mitigation choices: the “ATAC” matrix
- Insurance as a mitigant to operational risk
Building an operational risk management culture
- Understanding what causes poor risk management cultures
- Changing culture to take account of operational risk
MODES OF DELIVERY
- A. CLASSROOM TRAINING
- B. E-LEARNING
- C. CUSTOMISED IN-HOUSE TRAINING FOR A GROUP
Let us bring our classes to you! Our in-house training are ideal for groups of 10 or more people. We can provide Off-the-shelf training in the form of our classic courses, or we can provide bespoke training, tailored to your organisational goals and objectives. Please contact us for further details.