Operational Risk Management in Banks

Overview

Operational Risk by its nature is hidden and embedded in all the activities.

Incidents like the Barings bank, the global financial crisis of 2007-09, Covid-19 and ransomware attacks have reinforced this fact. The root cause of such unexpected losses has been inadequacy or failure of people, processes and technology.

Every organisation develops risk mitigation methodologies to minimise the loss impact. Developing effective risk management tools mandates a thorough understanding of organisational objectives and risk-related events that might affect the achievement of those objectives.

The fast-paced technological changes, data availability and new business models are transforming the way financial services are adapting to the changes and building Operational Resilience.

In this course, we shall endeavour to understand the concept of Operational Risk, how to build operational efficiency through an integrated approach and discuss global best practices.

Syllabus

The course is structured in eight modules, with each module catering to a separate risk domain.

Introduction:

* About the course
* Brief Objectives
* Relevance

Module I

Risk:

* Understanding Risk

o Definition of Risk
o Financial Risk & Non-Financial Risk
o Link between Risk, Return & Capital

* Understanding Operational Risk

o History & Background Of Operational Risk
o Nature Of Operational Risk
o Causes of Operational Risk

* Risk Management Process

Module II

Principles:

* Principles for the Sound Management of Operational Risk (PSMOR)
* Principles for Operational Resilience

Module III

Loss Data :

* Basel Guidelines
* Internal Loss Data
* External Loss Data
* Near Miss Events
* Loss Data Collection
* Root Cause Analysis

Module IV

Business Environment & Internal Control Factors ( BEICF) :

Risk & Control Self Assessment

* Basel Guidelines
* Objective & benefits of RCSA
* Process for Preparation
* Identification & Assessment of Risk
* Risk and control rating scales
* Risk Profiling and Health Index
* Ground Rules for the conduct of RCSA Workshop

Module V

Business Environment & Internal Control Factors ( BEICF):

Key Indicators

* Understanding Key Indicators
* Type of Key Indicators
* Attributes of Key Indicators
* Threshold Setting
* Review of Key Indicators

Module VI

Scenario Analysis

* Basel Guidelines
* Stress testing
* VaR

Module VII

Capital Computation

* Simple Approaches: Basic Indicator Approach (BIA), The Standardised Approach (TSA)
* Advanced Measurement Approaches (AMA
* Standardised Measurement Approach (SMA)

Module VIII