By attending this program you will learn about:
- The foundations of ORM and its development over the last fifteen years into a managed program.
- The development of a risk appetite statement for ORM and its relationship to your program.
- The role of insurance in ORM.
- Linking the activities of ORM to the Business Unit.
- Development of Key Risk Indicators (KRIs) at the Business Unit and Organization levels.
- Managing ORM in a multi-country environment.
- Effective reporting and management of ORM.
- Basel II and Solvency II and how these two sets of accords have influenced the development of an ORM program.
Who should attend
This course is highly recommended to the following groups of professionals:
- Senior Managers with ORM responsibilities.
- Internal Auditors with Basel responsibilities.
- Business Line Managers with ORM responsibilities.
- Risk professionals.
- Supervisory Authorities with ORM responsibilities.
Course Overview
This three day workshop takes a hands-on approach to Operational Risk Management (ORM) and provides the delegates with the information to build and enhance their ORM program. Current techniques and Best Practices will be covered with case studies to enhance the learning experience.
Day 1
Overview of Operational Risk Management
- Basel II and Solvency II backdrop.
- How both were developed and the overall projected impact on financial institutions, insurance companies and organizations that are both.
- Introduction to the purpose and aim of the new regulations.
- Timelines.
- Who must comply.
- Stages of development of each.
- Definition of Operational Risk under both.
- How Basel II and Solvency II are related and how they are different.
- Current state of Basel II and Solvency II.
- Control versus transparency.
- Evolution from controls to transparency.
- Creating value with ORM.
- All risks at some time wind up impacting the Balance Sheet and Income Statement. Understanding this and how to translate measurement and management into value will be explored.
- Introduction to the Case Studies.
- The following case studies will be used in this program:
Barings Bank – Perhaps one of the most well known bank failures in recent times, Barings Bank will be explored linking the corporate culture to the actions that caused the Bank to fail.
Washington Mutual Bank (WAMU) – This $300 plus million Bank failed in 2007 as a result of excessive loan losses. Embedded in these loan losses were extensive operational risk failures that led to its ultimate demise. The linkage between credit risk and operational risk will be established.
Nigerian Financial Crisis – In 2008, the banks in Nigeria were put through a stress test by the Central Bank. Several Banks were dramatically impacted by this, resulting in an overhaul of management and the Board of Directors. Operational Risk played a key role in the reasons for the impacts on the organizations.
- Designing the Operational Risk Framework.
- Exploration of methods and designs in place.
- Developing goals and objectives and obtaining organizational approval.
- Identifying data collection issues.
- Assessing the internal operational risk reporting culture.
- Establishing the framework for internal and external reporting.
- Moral hazard discussion.
- Methodologies.
- Data quality issues.
- Qualifying criteria for Compliance.
- Board of Directors:
- Responsibilities.
- Effective techniques for involvement.
- Establishing an Operational Risk Management system.
- Assessing resource requirements within the:
- Organisation.
- Business Lines.
- Bringing ORM to the forefront of the organization.
- Ensuring ORM system soundness and integrity.
Day 2
Creation, Building and Running ORM
- Building the ORM process.
- Independence.
- Observed range of practice.
- Demonstration of techniques.
- Risk mapping.
- Observed range of practice.
- Demonstration of techniques.
- Defining Materiality.
- Observed range of practice.
- Activity mapping.
- Observed range of practice.
- Discussion of these four criteria in the context of
- Board of Directors requirement.
- CEO and management concerns.
- Back, Middle and Front office concerns.
- Regulatory drivers.
- Scenario Analysis – Using scenarios to set risk tolerances and capital levels.
- Internationally active bank criteria.
- Establishing a system with clear responsibilities assigned to an ORM function.
- How to assess, monitor, control and mitigate OR.
- Codifying firm level policies and procedures.
- Design and implement firm’s OR assessment methodology.
- Design of Risk Reporting System.
Case Study Part II.
- The power and influence of stakeholders.
- Engaging stakeholders through partnership.
Case Studies: Greenpeace vs Shell - The Brent Spar; and BP - the oil spill in the Gulf of Mexico.
Day 3
Components of an Effective ORM and Utilisation of results.
- ORM Management.
- Following and collecting data by business line.
- How to integrate this into the risk management process of the organization.
- How to make this an integral part of the organization’s OR profile.
- Making the information play a prominent role in risk reporting, management reporting and risk analysis.
- Distinguishing losses between risk categories (credit, market, interest rate, etc.).
- Allocation of losses.
- Use of scenarios in OR.
- Identifying and using KRI’s.
- Risk control self assessments.
- Measurement of OR.
- Establishing the risk profile of the organisation.
- Operational VaR and regulatory capital calculation.
- Relating OpVaR to Credit VaR and Market VaR.
- Examples using OpVaR.
- Extreme Value Theory and OpVaR.
- Calculating OpVaR.
- Review of vendor data as a proxy for the organization.
- Regulatory capital allocation.
- Introduction to AMA modeling.
Case Study Wrap Up.
Concluding Remarks
-
John Hurlock is the Director of Integrated risk Management for Metavante Corporation, a US $2 Billion financial services technology firm based in Milwaukee, Wisconsin. John is responsible for the
delivery of risk management business solutions to financial institutions both nationally and internationally. In this arena John is focused on financial risk management, especially the areas covered under Basel II
(Credit, Market and Operational Risk).
Before rejoining Metavante, John was the Director of Business Consulting Services for BancWare, a risk management technology firm and a subsidiary of SunGard Corporation. John started the business
consulting practice at BancWare and delivered financial risk management solutions to financial institutions throughout the world.
John has over 25 years of experience in financial institutions. His first 15 years were spent working for financial institutions of various size and complexity, and has spent the last ten plus years in the business
consulting arena. During John’s banking career, he worked in several areas of banking including credit, treasury services and operations.
John has consulted with domestic and international financial institutions ranging in size from the community bank market to a US $1 trillion international financial institution. He has assisted banks as they have worked through regulatory orders and issues and been heavily involved in the roll out of advanced risk analytics including risk based capital, the Basel II Accord and stress testing.
John has an undergraduate degree in Economics and an MBA from the University of Wisconsin. He is currently an adjunct professor for Webster University, teaching in their MBA program. He teaches
Investment, Capital Markets and Management. John has also authored several articles and white papers and is a sought after speaker at banking conferences.
Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.
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