Course dates
Course Objectives
Addressing the fundamental causes of operational risk, this course demonstrates how the correct mix of philosophical and operational elements combine together to ensure success. It provides a simple structure for control and automatic mechanisms for detection and resolution of problems, using an evolutionary approach your new knowledge.
Summary of course content
- A systematic approach to the control of all operational risks within an ERM culture
- A pre-emptive control strategy providing the ability to identify, monitor and control both visible and hidden areas of exposure
- The skills to analyse and manage operational risk using best practice techniques, in line with Basel II requirements
- The ability to detect and control the potential for fraud and manipulation
- An understanding of the new role of today's C.R.O. and other risk departments
- The experience to develop a properly focused management information structure to promote risk awareness and facilitate control
Methodology
A series of real life case studies illustrate where problems originate and how they can be solved in a
simple systematic way. The course is highly interactive and is delivered by a mature practioner with many
years of successful experience of risk control, in a wide range of activities.
Who should attend?
- Senior and middle management who are concerned about risk
- Operations managers
- Middle office and risk managers
- Financial and product control staff
- Treasury managers
- Auditors and internal control officers
- IT and EDP operatives
- Regulators
- Compliance staff
- Accountants and consultants
Supporting publication
DAY ONE
Defining operational risk
- Definition of the elements of operational risk
- Introduction 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 and 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: "The Fall of Barings Bank"
Group discussion concentrating on internal and external failures and their relevance to today's highly complex and changing environment.
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 TWO
The BIS/Basel Accord as it relates to operational risk
- Key points in the Basel II Capital Accord
- Discussion on the implications for risk managers
- Main objectives and implementation plan
Implementing an operational risk management function within an ¡§enterprise risk management" structure
Organisation and reporting lines
- Establish best practice reporting structure which includes:
- The board
- CEO / COO / CRO
- Line managers, risk managers, audit and compliance
Analytical applications
- Detecting, analysing 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 an operational risk model
- Identification and prioritisation of key risk factors
- Prioritizing of operational risk drivers
- Establishing a risk hierarchy
- Event magnitude and frequency measurements
Group discussion on the benefits / pitfalls of risk models and measurement systems.
DAY THREE
Controlling costs and losses
- Visible and invisible risks and losses
- Cash management
- Non earning assets
- Error, fines and losses
- Margin controls
- Cost reductions
The use of limits as a control mechanism
- Guidance limits and mandatory limits
- Positions
- Volumes
- Credit / settlement
- Outstandings
Case studies: the use of stop loss limits
The role of management information in controlling risk
- Highlighting risk areas and non-compliance
- Documenting and authorisation of exceptions and excesses
- Reports design and structure
- Getting focussed
Case study: LTCM hedge fund
Group discussion on its relevance to 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 takes the delegate on a step-by-step journey through each 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 frauds.
DAY FOUR
Case study: Allied Irish Bank (ALLFIRST)
This case study will clearly highlight how a lack of proper controls, knowledge and infrastructure can have devastating consequences. It will 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 and development role
- The co-ordinator
Portfolio controls
- The use of portfolio controls to control risk
- Trading - Investment - Arbitrage - Hedging
- Managed Asset Portfolios (MAPS)
- Discretionary funds
Case study: "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 went
undetected for years building up positions of $50 billion and losses of 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.
Summary
Hilton Hotel Singapore, Singapore, Singapore
This programme takes place on a non-residential basis at Hilton Hotel Singapore. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.
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Kevin Merry
Kevin is a leading international trainer and consultant with over 27 years extensive experience with major “blue chip” financial institutions including JP Morgan, CIBC, Mizhuo and other leading global banks. Kevin now specialises in training and focuses on five main areas: "Operational Risk Management & Measurement", "Back Office Management", "Effective Middle Office", “Auditing” and "Understanding Financial Products".
Courses run by this instructor
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Course dates