Advances in Operational Risk: Firm-wide Issues for Financial Institutions

Advances in Operational Risk: Firm-wide Issues for Financial Institutions

By: Published in Association with Anderson (author)Hardback

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This title brings together insights into operational risk and its related issues, practices and developments. It includes contributions from respected industry participants, regulators, industry bodies and academics active in the area of operational risk. It incorporates developments within the regulatory environment plus the Basle Accord and discusses a variety of subjects including acquisition and merger risk, compliance issues and reputational risk. It examines the potential for operational losses arising from the increasing use of technology and the operational threat of e-commerce risk.


Advances in Operational Risk Firmwide Issues for Financial Institutions CONTENTS Introduction Operational Risk: Current Situation and Future Prospects. Joe Tarantino and Adam Markson (Sponsors: Andersen). Managing Operational Risk 1. Managing Operational Risk. ? Roles and responsibilities - comparability with market and credit frameworks, independence of risk management in the businesses, audit, change management, crisis management and co-ordination activities. ? Information requirements - types of information, dimensions of information, different needs of information users and integrated framework. ? Cultural drivers - empowerment, adding value, marketing, efficiency of processes & shareholder value, basis for competition, regulators, training and phases of becoming mature. Mark Laycock, Fred A Peemoller and Robert Hubner, Deutsche Bank 2. Insurance as a Mitigant for Operational Risk. ? Hedging operational risk with derivatives - cost reduction through more efficient insurance/hedging of operational risks. ? Hidden risks posed by complex financial products. Brendon Young, Operational Risk Research Forum and Simon Ashby, Nottingham University 3. Real Options in Bank Acquisition Decisions. ? Operational risk in mergers and acquisitions. ? Valuing intangibles using real options. ? A switching option model. ? A case study of a bank acquisition. Hemantha Herath, University of Northern British Columbia and John Jahera, Auburn University 4. Institutional Benefits of Introducing an Effective Operational Risk Management Framework. ? Framework setting breadth of topic. ? Loss databases - granularity, categorisation, technology, validation, analysis, insurance, regulatory issues and cost. ? Pros and cons of key control indicators - granularity, categorisation, input, technology, user involvement, validation, data display, analysis, insurance, regulatory issues and cost. ? Risk assessment - granularity, categorisation, input, technology, user involvement, validation, data display, analysis, regulatory issues and cost. ? Specialist functions and operational risk. ? Regulatory capital. ? Internal capital application models. ? Holistic risk management. Roland Kennett, BNP Paribas Risk Analysis, Identification and Modelling 5. Models and Application: A Systemic Approach to Operational Risk. ? The need to blend quantitative and qualitative techniques. ? Strategic set-up framework. ? Analysis of risk events. ? Performance measurement tools. ? Information flows. Gerald P. Sampson, Dilip S. Kumar and David Lau, Andersen 6. A Data Model for Operational Risk Management and Control ? Risk categories. ? What do we mean by data and a data model? ? Event level data requirements. ? Relevance of data to different risk profiles and business lines ? Additional data characteristics and attributes. ? Data limitations. ? Meeting the Basel requirements. Lavinia Stubbs and Enno Kuhnert, UBS Warburg 7. Quantitative Methods for Operational Risk Capital Allocation ? Capital allocation for operational risk. ? Market response to quantitative methods. ? Problems faced with operational loss modelling. ? Modelling high frequency, low impact operational risks. ? Integrating market, credit and operational risk - a framework. ? Extreme value models for low frequency, high impact operational risks. ? Market, credit and operational risk thresholds. ? Explanation of the 'peaks over threshold' model. ? Small samples data and the use of Bayesian hierarchical Monte Carlo techniques. Elena Medova, The Judge Institute of Management Studies, Cambridge University 8. Developing an Operational VAR using Extreme Value Theory. ? Modelling an operational risk database for extreme events. ? Stochastic processes: point processes and block maxima. ? Severity estimation using EVT. ? Frequency estimation. ? Combining extreme severity distribution and frequency with operational VAR. Marcelo Cruz, Imperial College 9. The Application of Reliability Theory to Operational Risk. ? Applications of operational research in risk management. ? Operational risk: steady state and innovation. ? Reliability theory. ? Application of reliability theory to operational risk. ? The "development of a disaster". Patrick McConnell, Henley Management College 10. Model Selection for Operational Risk. ? Typology of operational risk models. ? Regulatory approach to operational risk models. ? Choosing the right model. ? Four step measurement process: input, operational risk assessment, review and validation, output. ? Key to implementing operational risk models. ? Illustrative impact of operational risk models. Bob Mark and Michel Crouhy, CIBC and Dan Galai, Hebrew University 11. Modelling Model Error: The Case of Insurance Products with Minimum Guarantee. ? Integrative asset and liability modelling. ? Sources of model error. ? Eliminating model error. Stavros Zenios, University of Cyprus and Andrea Consiglio, University of Palermo New Regulatory Environment, Compliance and the Future 12. Operational Risk - A Supervisory View. ? Current proposals. ? Issues still to be resolved. ? Supervisory response and difficulties. ? Possible resolution. Dr Jeremy Quick, FSA 13. Building an Operational Loss Database ? Drivers for industry to develop a database ? General Issues - confidentiality, anonymity, trust. ? Specific Issues - classification, cause, near misses. ? Data Fields - categorisation, description, impact. ? Limitations - auditability, threshold levels, legal aspects. John Thirlwell, BBA 14. Managing Reputational Risk. ? Importance. ? Different categories. ? Generic reputational risk areas for financial institutions. ? Weighting the risk. ? Assess and monitor. ? Guiding principles. ? Contingency planning. Peter B. Schofield, American Express 15. A Critical Approach to Operational Risk. ? Managing intangible Risks - a requirement for establishing a durable company. ? Reasons for seeking a robust and consistent approach - quantifying intangible risk. ? Missed opportunities - lack of transparency, loss of competitiveness, efficiency and flexibility. Alexandra Hayles and Jonathan Barber, SERM Rating Agency 16. E-commerce: Opportunities and Challenges ? Quality of service. ? Potential for development. ? Business issues and IT impact. ? Identifying and managing IT OpRisk. John McCann, Cartier Partners

Product Details

  • ISBN13: 9781899332830
  • Format: Hardback
  • Number Of Pages: 300
  • ID: 9781899332830
  • ISBN10: 1899332839

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