Day 1
Defining Operational Risk
The opening session will clearly define the elements of Operational Risk and introduce delegates to the value of a quality environment and the need for a sound and responsible management philosophy.
The Role of Quality in Controlling and Reducing Risk• Achieving First Time Quality
• The Management of Quality
• The Use of Optimum Control Points
• Key Risk Controls
• Cause & Effect Analysis
• Generic Cause Factors
CASE STUDY: Problem Origination and Escalation.This case study will show how big problems and risks can Originate from relatively insignificant cause elements and how these problems can be prevented at source.
CASE STUDY: Video– “The Fall of Barings Bank”Followed by group discussion
The Role of Responsibility Management• Its use in Controlling Risk
• How to implement
• Empowerment
• Allocation and Acceptance of Responsibility
• The Dangers of Short Term Strategies
Day 2The BIS/BASEL Accord as it relates to Operational Risk.
• Key points in new Basel II Capital Accord
• Discussion on the implications for Risk Managers
• Main objectives and implementation plan.
Implement an Operational Risk Management
Function within an “Enterprise Risk Management” structure.
• The Board
• CEO COO CRO
• Line Managers, Risk Managers, Audit and Compliance.
Analytical Applications• Detecting, Analyzing and Controlling Risk Elements
Build an operational risk scoring process• Review of the major types of operational risks
• Measurement framework
• Scoring approaches
• Key performance and Key risk indicators
• Critical Success Factors
Example of a operational risk model• Identification and Prioritization of key risk factors
• Prioritizing of operational risk drivers
• Establishing a risk hierarchy
• Event magnitude and frequency measurements
Group discussion on the benefits / pit falls of risk Models and measurement systems
Day 3
Controlling Costs and Losses• Visible and Invisible Risks and Losses
• Cash Management
• Non Earning Assets
• Errors, Fines & Losses
• Margin Controls
• Cost Reductions
The Use of Limits as a Control Mechanism• Guidance Limits and Mandatory Limits
• Positions
• Volumes
• Credit/Settlement
• Outstanding
CASE STUDY: The use of Stop Loss Limits
The Role of Management Information in Controlling Risk• Highlighting Risk Areas and Non-compliance
• Documenting and Authorization of exceptions/excesses
• Reports design/structure
• Getting focused
CASE STUDY: LTCM Hedge FundGroup discussion of its relevance on today’s financial and operational risks
The Systematic Control Process Workshop:An analysis of the control process from initiation through to settlement and reconciliation with detailed examination of:
• Pre-Dealing Controls
• Dealing Controls
• Middle Office Functionality
• Processing Controls
• Payment
• Position
• Reconciliation
• Accounting
• Documentation
• Reporting
• Compliance
This section will take the delegate on a step by step journey
through every stage of the process with real life case studies
and examples of problems, risks controls and solutions. It
will provide a generic and systematic control process to
limit and control risk at every stage
CASE STUDIES and REAL LIFE examples:Including Back Office FraudsDay 4
CASE STUDY: Allied Irish Bank (ALLFIRST)
This case study will clearly highlight how a lack of proper controls, knowledge and infrastructure can have such devastating consequences. It will also show how this could have been identified and easily prevented.
New Products Steering Committee
Disaster Recovery
Systems Security
Sensitivity Testing / Stress Testing
Hedging to Reduce Risk
• Hedge Products
• The Process of Hedging
CASE STUDY: How to hedge using Derivative Products
The Role of the Middle Office in Controlling and Mitigating Risk.
• Middle Office Functionality Explained
• The Middle Office as the catalyst for control
• The Training & Development Role
• The Co-coordinator
Portfolio Controls• The use of portfolio controls to control risk
• Trading
– Investment
– Arbitrage
– Hedging
– Managed Asset Portfolios (MAPS)
– Discretionary Funds
CASE STUDY: Group discussion re “The Biggest Fraud Case in Banking History” Societe Generale Paris.
Despite Millions of US$ spent on highly developed IT
and Risk management systems, one person was allowed
to go undetected for years building up positions of $50
Billion and fantastic losses of some US$10 BILLION!
Societe Generale is just another failure in a very
long line of Banking failures/crisis in which the only
real difference is the size of the actual loss.
This session will clearly demonstrate how the Middle
office/Back Office and other departments with
Responsibilities for risk could have easily prevented
this fraud.