Operational Risk Management

Hours: 60 / Access Length: 3 Months / Delivery: Online, Mentor Supported

Course Overview:

Changes in markets, techniques, technologies, and products have altered the landscape of Operations and fueled the explosive development of Operational Risk management. The regulators of financial and public companies are demanding a far greater level of disclosure and awareness by directors about the risks they manage and the effectiveness of the controls they have in place to reduce or mitigate these risks. There is also a greater realization that a major source of earnings volatility can be attributed to the way a firm operates and not “financial risk”. All these changes have triggered the need for an efficient Operational Risk Management system in banking/finance organizations.

Course Outline:

Introduction to Operational Risk

• Objectives
• Defining operational risk
• Significance of operational risk
• Operational risk management programs
• Addressing operational risk
• Measuring and modeling operational risk

Basic Concepts

• Objectives
• Loss events
• Risk Factors, loss types and event/ factor controllability
• Dependencies between Risk Factors and Events
• Attribution of Loss

Regulatory Treatment of Operational Risk under Basel-II

• Objectives
• Introduction, Definitions and data issues
• Measurement Methodologies
• Role of Pillars 2 and 3
• Sound Practices

Operational Risk in Various Banking Sectors

• Objectives
• Introduction and Spectrum of Risks
• Accounting policies, costing and pricing models
• Private banking sector

Operational Risk in insurance

• Objectives
• Introduction
• Risks exclusive to insurance and Regulatory Issues
• Alternative Risk Transfer and Finite Risk Captives
• Captives

Developing objectives and identifying risks

• Objectives
• Risk Management Agenda
• Risk Management Targets
• Risk Management Organization and Policies
• Benchmarking Internal Processes and Resources
• Identifying Process and Resource Risks
• Identifying Risk Factors
• Identifying and Categorizing Loss Events

Estimating potential losses – Data

• Objectives
• Challenges to Operational Risk analysis
• General measurement techniques
• Historical analysis
• Subjective risk assessment

Estimating potential losses – Loss distributions

• Objectives
• Overview of probability distributions
• Building a distribution
• Probability distributions
• Estimating risk factors
• Choosing an event distribution
• Operational Risk database

Analyzing risks

• Objectives
• Aggregating risks
• Monte Carlo loss simulation
• Risk management alternatives
• Analyzing loss events
• Analyzing risky processes and resources
• Analyzing risk factors

Loss prediction and prevention

• Objectives
• Loss prediction
• Loss prevention
• Process reengineering and work restructuring
• Product redesign and automation
• Human factors engineering
• ERP and reliability maintenance

Loss control

• Objectives
• Introduction
• Diagnostic controls and Inventory management
• Redundant systems and boundary systems
• Computer security and physical security management
• Internal and external audit

Loss reduction and risk avoidance

• Objectives
• Legal risk reduction and loss isolation
• Contingency Planning
• Crisis Management
• Risk avoidance
• Quality management
• Human resources management
• Organizational design, Culture and relationship management

Risk financing

• Objectives
• Introduction
• Financial restructuring
• Asset-Liability Management
• Corporate diversification
• Insurance
• Self-Insurance
• Hedging using derivatives
• Contractual risk transfer

Measurement framework

• Objectives
• ORM cycle
• Framework criteria and assumptions
• Current framework approaches
• Measurement process for ORM
• Delta and EVT methodologies

ORM in practice

• Objectives
• Learning and response loops
• Guidelines for effective reporting
• Event reports and Operational profiles
• Risk reports
• Evaluating and updating the risk model
• Implementing bank-wide ORM

Enterprise-wide Risk Management (ERM)

• Objectives
• Role of technology
• Enterprise-wide risk information systems
• Challenges to ERM
• Project Management for an ERM system

Basic and causal models

• Objectives
• Operational Risk Management (ORM) model
• Top-down risk models
• Bottom-up risk models
• Selecting a risk model
• Causal models

Legal risk and taxation rules

• Objectives
• Introduction
• Contract enforcement
• Board of directors and shareholder activism
• Management responsibility for legal risk
• Transparency and collateral
• Shifting ground in international taxation

E-banking

• Objectives
• Introduction
• Operational risks associated with Electronic Banking
• Security risk
• Systems design, implementation, and maintenance flaws
• Customer misuse of products and services

Systems and software

• Objectives
• Introduction
• Framework/Components of an operational risk system
• Operational risk software
• AMELIA
• MICROBANK
• Relex software
• ALGORITHMICS

Case study Barings

• Objectives
• Overview
• How the massive losses were incurred
• Lessons to be drawn from the incident

All necessary materials are included.

System Requirements:

Internet Connectivity Requirements:

• Cable, Fiber, DSL, or LEO Satellite (i.e. Starlink) internet with speeds of at least 10mb/sec download and 5mb/sec upload are recommended for the best experience.

NOTE: While cellular hotspots may allow access to our courses, users may experience connectivity issues by trying to access our learning management system.  This is due to the potential high download and upload latency of cellular connections.   Therefore, it is not recommended that students use a cellular hotspot as their primary way of accessing their courses.

Hardware Requirements:

• CPU: 1 GHz or higher
• RAM: 4 GB or higher
• Resolution: 1280 x 720 or higher.  1920x1080 resolution is recommended for the best experience.
• Speakers / Headphones
• Microphone for Webinar or Live Online sessions.

Operating System Requirements:

• Windows 7 or higher.
• Mac OSX 10 or higher.
• Latest Chrome OS
• Latest Linux Distributions
  

NOTE: While we understand that our courses can be viewed on Android and iPhone devices, we do not recommend the use of these devices for our courses. The size of these devices do not provide a good learning environment for students taking online or live online based courses.

Web Browser Requirements:

• Latest Google Chrome is recommended for the best experience.
• Latest Mozilla FireFox
• Latest Microsoft Edge
• Latest Apple Safari

Basic Software Requirements (These are recommendations of software to use):

• Office suite software (Microsoft Office, OpenOffice, or LibreOffice)
• PDF reader program (Adobe Reader, FoxIt)
• Courses may require other software that is described in the above course outline.