Operational risk management : a complete guide for banking and fintech / Philippa X. Girling.

Format:

Book

Author/Creator:

Girling, Philippa, author.

Series:

Wiley Finance

Language:

English

Subjects (All):

Risk management.

Physical Description:

1 online resource (381 pages)

Edition:

2nd ed.

Place of Publication:

Hoboken, New Jersey : John Wiley & Sons, Inc., [2022]

Summary:

"Today, chief risk officers are finding themselves facing the daunting task of providing assurances to senior management and to board members that operational risks are being effectively managed and mitigated. Traditional market and credit risk approaches offer only partial effectiveness in the operational risk field, and this book explores the unique qualitative aspects of operational risk manage-ment. This book also provides insight into some of the (often noto-rious) operational risk events that have occurred in the past 10 years, with analysis of the JPMorgan Whale event, the Archegos Credit Suisse event, the UBS and Société Générale unauthorized trading scandals, the reputational risk events related to LIBOR and the recent Australian Banking scandals, the Knight Capital technology misstep and the management of operational risk at the Olympics. The Covid-19 Pandemic's impact on operational risk losses is also explored, along with the effectiveness of preparations for that event."-- Provided by publisher.

Contents:

Cover

Title Page

Copyright Page

Contents

Preface

Acknowledgments

Chapter 1 Definition and Drivers of Operational Risk

The Definition of Operational Risk

2012 London Olympics: A Case Study

Test One: Do the Seven Basel Operational Risk Categories Work in the Real World?

Test Two: The Risk Management Tools

Operational Risk Management and Operational Risk Measurement

Operational Risk Management

Operational Risk Measurement

The Relationship between Operational Risk Management and Other Risk Types

Drivers of Operational Risk Management

Key Points

Review Questions

Notes

Chapter 2 The Regulatory Push

History of the Basel Accords

Rules of the Accords

Basel I

Basel II

Adoption of Basel II in Europe

Adoption of Basel II in the United States

Securities and Exchange Commission Amendments to the Net Capital Rule

U.S. Regulators' Adoption of New Regulations to Apply Basel II

Impact of the Financial Crisis

The Limitations of Basel II

European Response to the Crisis

U.S. Response to the Crisis

Basel III

Chapter 3 The Operational Risk Framework

Overview of the Operational Risk Framework

The Foundations of the Framework

Governance

Culture and Awareness

Policies and Procedures

The Four Data Building Blocks

Loss Data Collection

Risk and Control Self-Assessment

Scenario Analysis

Key Risk Indicators

Measurement and Modeling

Reporting

Risk Appetite

Note

Chapter 4 Operational Risk Governance

Role of Governance

First Line of Defense

Second Line of Defense

Who Should Own the Operational Risk Function?

What Should the Operational Risk Function Own?

Third Line of Defense

Audit

Validation

Risk Committees

Key Points.

Review Questions

Chapter 5 Culture and Awareness

Winning over the Firm

Marketing and Communication

Agile

Training

Planning

The "Use Test"

Review Question

Chapter 6 Policies and Procedures

The Role of Policies, Procedures, Guidelines, and Standards

Best Practices

Operational Risk Policy

Sample Operational Risk Policy

Sample Standards, Procedures, and Guidelines

Extract from a Loss Data Standards Document

Extract from a Loss Data Procedures Document

Extract from a Loss Data Guidelines Document

Linkage between Documents

Chapter 7 Internal Operational Risk Event Loss Data

Operational Risk Event Data

Internal Loss Data or Internal Operational Risk Events

Why Collect Operational Risk Event Data?

Who Should Collect the Operational Risk Event Data?

What Should Be Collected in the Operational Risk Event Data Program?

Risk Event Categories

Internal Fraud

External Fraud

Employment Practices and Workplace Safety

Clients, Products, and Business Practices

Damage to Physical Assets

Business Disruption and System Failures

Execution, Delivery, and Process Management

Using the Basel Risk Categories

Minimum Operational Risk Event Data Standards

Comprehensive

Threshold

Amount

Date

Description and Causes

Criteria for Allocation to Business Line

Criteria for Allocation to Central and Supporting Functions

All Impacted Departments

Boundary Events Identified

Action Items

Nonfinancial Impacts

Where Should Operational Risk Event Data Be Collected?

When Should Operational Risk Event Data Be Collected?

How Should Operational Risk Event Data Be Collected?

Chapter 8 External Loss Data

External Operational Risk Event Data.

Sources of External Loss Event Data

Subscription Databases

Consortium Data

Challenges of External Data

Société Générale and the External Event That Shook the Operational Risk World

Chapter 9 Key Risk Indicators

Key Performance Indicators

Key Control Indicators

Metric Types

Selecting Kris

Thresholds

Kri Standards

Kri Challenges

Metrics Examples

People Metrics

Compliance Metrics

Technology and Infrastructure Metrics

Business Continuity Metrics

Client Metrics

Trade Execution and Process Management Metrics

Financial Statement Metrics

Chapter 10 Risk and Control Self-Assessments

The Role of Assessments

Control Assessments

Risk and Control Assessments

RCSAs

RCSA Methods

Questionnaire Approach

Workshop Approach

Hybrid RCSA Methods

RCSA Scoring Methods

Scoring Control Effectiveness

Risk Impact Scores

Probability or Frequency

Risk Severity

RCSA Best Practices

Interview Participants Beforehand

Review Available Background Data from Other Functions

Review Past RCSAs and Related RCSAs

Review Internal Loss Data

Review of External Events

Carefully Select and Train Participants

Document Results

Score Appropriately

Identify Mitigating Actions

Implement Appropriate Technology

Ensure Completeness Using Taxonomies

Themes Identified

Leverage Existing Assessments

Schedule Appropriately

Backtest or Validate Results

Chapter 11 Scenario Analysis

Role of Scenario Analysis

Scenario Analysis Approaches

(a) A Clearly Defined and Repeatable Process

(b) Background Preparation

(c) Qualified and Experienced Facilitators with Consistency in the Facilitation Process.

(d) The Appropriate Representatives

(e) A Structured Process for the Selection of Data

(f) High-Quality Documentation Which Provides Clear Reasoning and Evidence Supporting the Scenario Output

(g) Independent Challenge and Oversight

(h) A Process That Is Responsive to Changes

(i) Mechanisms for Mitigating Biases

Scenario Analysis Output

Chapter 12 Capital Modeling

Operational Risk Capital

Basic Indicator Approach

Standardized Approach

Alternative Standardized Approach

Future of the Basic and Standardized Approaches

Advanced Measurement Approach

Quantitative Requirements of an AMA Model

Loss Distribution Approach to Modeling Operational Risk Capital

Scenario Analysis Approach to Modeling Operational Risk Capital

Hybrid Approach to Modeling Operational Risk Capital

Insurance

Future of Capital Requirements: Basel III

Basel III Standardized Approach

Disclosure

Chapter 13 Reporting

Role of Reporting

Operational Risk Event Reporting

Impact of Gains on Internal Event Reporting

Trends in Internal Losses

Internal Losses by Risk Category

Timeliness

External Loss Data Reporting

Risk and Control Self-Assessment Reporting

Key Risk Indicator Reporting

Scenario Analysis Reporting

Capital Reporting

Action Tracking Reporting

A Consolidated View

Dashboards

Chapter 14 Risk Appetite

The Role of Risk Appetite

Regulatory Expectations

Implementing a Risk Appetite Framework

The Risk Appetite Framework as a Strategic Decision-Making Tool

Appetite Governance: The Board, "C-Suite," and Business Lines

Promoting a Firmwide Risk Appetite Framework

Monitoring the Firm's Risk Profile within the Risk Appetite Framework.

Monitoring Operational Risk Appetite

Risk Capacity

Operational Risk Appetite

Operational Risk Tolerance

Operational Risk Limits/Indicators

Risk Appetite Today

Chapter 15 Reputational Risk and Operational Risk

What Is Reputational Risk?

Reputational Impact

Global COVID-19 Pandemic

Banking and Fintech Scandals

Stock Price Impacts

Regulatory Oversight of Reputational Risks

Reputational Risk Management Framework

Drivers

Event Data Collection

RCSA

Chapter 16 Operational Risk and Convergence

Operational Risk as a Catalyst for Convergence

Governance, Risk, and Compliance (GRC)

Assessment Convergence

Convergence of Metrics

Converged or GRC Reporting

GRC Tools

Chapter 17 Best Practices in Related Risk Management Activities

New-Product Approval

Supplier and Third-Party Risk Management

Legal Risk Management

Legal Considerations in the Operational Risk Framework

Capturing Legal Risks Using the Operational Risk Framework

Regulatory Risk Management

People Risk Management

Fraud Risk Management

Technology Risk Management

Climate Risk

Pandemic Planning

Strategic Risk

Chapter 18 Case Studies

JPMorgan Whale: Risky or Frisky?

Appendix: Answers to Review Questions

Chapter 1

Chapter 2

Chapter 3

Chapter 4

Chapter 5

Chapter 6

Chapter 7

Chapter 8

Chapter 9

Chapter 10

Chapter 11

Chapter 12

Chapter 13

Chapter 14

Chapter 15

Chapter 16

Chapter 17

Chapter 18

About the Author

About the Website

Index

EULA.

Notes:

Description based on print version record.

Includes index.

Other Format:

Print version: Girling, Philippa X. Operational Risk Management

ISBN:

9781119836063

1119836069

9781119836056

1119836050

OCLC:

1286072405