Operational Risk Management - Oracle · Operational Risk Management Fulfilling Basel II Requirements and Enhancing Business Control ... over solution to mitigation incl. Loss DB,

Maurizio Bradlaw

June, 2003

Operational Risk ManagementFulfilling Basel II Requirements and Enhancing Business Control

Oracle AppsWorld 24th June 2003

2 - Operational Risk Presentation_Oracle_Appsworld - June 2003

Agenda

n Introduction to Capco

n Operational Risk - Market Challenges & Trends

n Capco‘s OR Framework and Approach

n Partners & Solution Overview - ORTOS

n Summary


Capco is the first services and technology solutions provider exclusivelyfocused on forming the future of finance.

Global growth Focus

Capco’s business model Clients

n Capital marketsn Private client /

asset managementn Banking

Client segments

n Strategicn Marketingn Technologyn Academic

Alliances

Some of our new clients in 2001

Technology

FinancialServices

Consulting

We combine knowledge and experience from Financial Services, Consulting and Technologyindustries to deliver high quality end-to-end solutions to our clients

0

Jul-9

8

The Capital Markets Company is founded in Belgiumopening Antwerp officere

venu

e

120

100

80

40

60

20

Sep

-98

Dec

-98

Feb

-99

Mar

-99

Jun-

99

Oct

-99

Dec

-99

Jan-

00

Londonoffice

NYoffice

Parisoffice

Frankfurtoffice

Singaporeoffice

Headcount430

Headcount85

Dec

-00

Dec

-01

Headcount550

SFoffice

Bostonoffice

Headcount650

Jul -

02

MarketInfrastructure

BusinessInnovation

ProgramManagement

Technology

OperationalEfficiency and

Control

Thought Leadership


Agenda


n Operational Risk - Market Trends & Challenges



n Summary


Credit RatingCompetition

InvestorsRegulation

Why is Operational Risk a pressing issue? Market TrendsThe banks that intend to adopt the Advanced Measurement Approach methodologyneed to hold a minimum of 3 years of loss data by December 2006

§ National Regulators have geared up to address ORon the basis of methodology, approach, reportingand system requirements – FSA CP142, NBA Q3

§ Further pressure is being generated fromledgistlation „Sarbanes-Oxley Act 2002“

Operational risk will provide comparability ofinternal operations across peer banking group

§ WTC – disaster recovery & know-your-client§ Enron – SPV and legal entity oversight§ Anderson & Tyco – corporate governance§ Allied Irish Bank – control and oversight

There has been an increased expectation in thescope of operational risk with each significantfinancial loss

§ Recent investment in operational risk technologiesand the development of methodologies by theagencies

§ Recent statements link operational risk andcorporate governance

Operational risk factors will most likely beginto influence the overall credit rating

§ Your bank will be expected to use an AdvancedMeasurement Approach

§ Capco believes that most banks will have parts ofthe loss database populated with 2 to 3 years ofhistoric data

Most peer western banks have begun their efforts

OperationalRisk Drivers


Present Challenges in addressing Operational RiskOperational Risk and the fulfillment of Basel II regulations is one of themajor challenges facing financial institutions for 2003

n There is no standard approach in the market and even the regulators will adjust theirrequirements along the “best effort” concept (Motto to the AMA ”Let one thousand flowersbloom”)

n The regulators are still finalizing requirements and there are discrepancies betweeninternational regulatory bodies – creating a difficult environment for multi-nationalcompanies to plan for solutions which meet all requirements

n The majority of banks have done little in recent years to address the specific ORregulatory issues faced, believing that the basic approach can always be adhered to.Though some banks are well ahead with AMA and depending on the size and grouping ofbanks, it is their peers which are the benchmark

n Main issues presently faced internally by the majority of financial institutes;n Understanding the OR Mandate and choosing a concise and structured approachn Comprehensive framework from Governance, over solution to mitigation incl. Loss DB, Self Assessment,

KRI‘s and meaningful reporting standardn Lack of senior management attention – reasons of understanding & market/priorityn Attaining data and certifying data quality and quantificationn Business motivation – bringing value added to heads of businessn Budgetary issues – the business case is more qualitative then quantativen Striking the right balance between the information required and the analysis effortn Different approaches within a single financial institution – Usually to be found between IB and Corporate

leveln Having the right personnel at the right places -Creating a risk aware culture


Agenda





n Summary


Definition of Operational RiskThe publication of the New Basel Capital Accord has resulted in the recognition ofoperational risk as a formal discipline and has resolved much of the debate over itsdefinition

Basel defines operational risk:

“The risk of loss resulting frominadequate or failed internalprocesses, people and systemsor from external events.”

Capco’s expanded definition of operational risk:

“The risk of a loss resultingfrom inadequacies or failures inprocesses or projects due totechnology, staff, organizationor external factors.”

In preparation, banks and financial institutions need to meet the proposedrequirements by 2006, this requires decisions to be taken now!


The Basel Committee for Banking Supervisionsets with Basel II new requirementsconcerning the identification, collection andevaluation of operational risks. Banks musttherefore:

§ evaluate their operational risks (assess)

§ collate their operational losses

§ have indicators for operational risk

§ put aside capital to cover operational risks

§ publish reports about the handling ofoperational risk

Requirements of Basel-II

Basel II requirements for Operational RiskThe defined requirements stated by the BIS are mandatory for all banks and financialinstitutions and include a series of actions which can be implemented using differentapproaches

Basel II implementation is mandatory and presently scheduled for December 2006. Though itis not the BIS that is putting the most pressure on financial institutions. The pressure iscoming from Investors, Competition and Credit Rating Agencies


Operational RiskManagement consists of :

n Governance: Establishment ofpolicies and the definition of theOR framework to implementthese policies

n Identification: Stipulation anddocumentation of risk exposurealong process and project lines

n Measurement: Qualification andquantification of risk and loss infinancial value and quality

n Monitoring: Identification,tracking and control of riskevents and resolution thereof

n Mitigation: Proactive mgmt. ofrisk exposure

Identification Measurement Monitoring MitigationGovernance

Self Assessment

Capture of Losses

• ImproveProcesses

• EnhanceTechnology

• BusinessContinuityPlanning

• EnhanceBusinessControls

• ProjectQualityAssurance

• ProjectReadinessAssessment

• BoardReporting

• RegulatoryReporting

• QualityAssurance

• CapitalAllocation

• Consisten-cy acrossGroup

• Independ-ent Review

• AuditControl Economic Capital

Key Risk Indicators

Process Mapping

Strategy &Design

Implementation Mitigation

Operational Risk Management FW– Overview of Building blocksCapco has developed a pragmatic framework that entails a set of tools to govern, identify,measure and monitor operational risks as well as a suite of solutions to mitigate operationalrisk exposures - according to the Advanced Measurement Approach (AMA) to minimizerequired economic capital


What is it?

Why do we need it?

How does it work?

Mapping of business core and support processes,IT-Systems, external suppliers, organizationaldependencies and projects to product lines,organizational units and locations

n To define basis for structured self-assessment

n To assign operational losses

n To anchor key risk indicators

n To gain organizational oversight

n To map product lines to standard businesslines (Basel II)

n Gather products per location and org. unit

n Gather processes, IT-systems, projects etc.

n Assign processes, IT-systems, projects etc. toproducts


Self Assessment

Capture of Losses

• Improve Processes

• Enhance Technology

• Business Continuity Planning

• Enhance Business Controls

• Project Quality Assurance

• Project Readiness Assessment

• Board Reporting

• Regulatory Reporting

• Quality Assurance

• Capital Allocation

• Consisten-cy across Group


• Audit Control Economic Capital

Key Risk Indicators

Process Mapping

Strategy & Design



Self Assessment

Capture of Losses







• Board Reporting







Key Risk Indicators

Process Mapping

Strategy & Design


Building Blocks in Detail - Process MappingThe Process Mapping consists of a group-wide survey of processes and projectsaccording to the product flows and staff tasks of a financial institution.

Process Mapping


What is it?

Why do we need it?

How does it work?

Assessment of operational risks and quality inbusiness processes and projects structured byrisk categories, such as technology, humanresources, organization, external factors.

n To gain the operational risk profile per product,organizational unit and / or location

n To identify and prioritize need for managementaction or attention

n To provide for an early warning system

n To assign economic capital (and to facilitateproduct pricing)

n Define and construct questionnaire

n Identify and set up users

n Have questionnaires assesses and approved

n Assure quality, aggregate and report


Self Assessment

Capture of Losses







• Board Reporting







Key Risk Indicators

Process Mapping

Strategy & Design



Self Assessment

Capture of Losses







• Board Reporting







Key Risk Indicators

Process Mapping

Strategy & Design


Self Assessment

Building Blocks in Detail - Self AssessmentThe Self Assessment captures qualitative and quantitative information to estimatepotential losses thereby including valuable comments. It also is the underlying toolfor the evaluation of Economic Capital institution


What is it?

Why do we need it?

How does it work?

Collection of operational losses in businessprocesses and projects structured by riskcategories, such as technology, human resources,organization, external factors.

n To analyze organizational weaknesses perproduct, organizational unit and / or location

n To identify and prioritize need for managementaction or attention

n To validate economic capital

n Identify loss booking procedures and accounts

n Identify responsible people

n Replace existing manual procedures with losscollection workflow

n Coordinate with Internal Audit, Insurance andCompliance


Self Assessment

Capture of Losses







• Board Reporting







Key Risk Indicators

Process Mapping

Strategy & Design



Self Assessment

Capture of Losses







• Board Reporting







Key Risk Indicators

Process Mapping

Strategy & Design


Capture of Losses

Building Blocks in Detail - Capture of LossesOccurred losses must be correctly stored and categorized along Basel-II requirementsin a central database, that can either be used as a quality check for the selfassessment results or as the evaluation data for Economic capital calculation


What is it?

Why do we need it?

How does it work?

Collection of relevant and measurable key riskand key performance indicators (such as e.g.Nostro breaks, open positions, staff turnover,gross income)

n To monitor organizational situations closelyon a day-to-day basis

n To analyze identified operational risks moreclosely

n To provide for early warning signals

n Identify key risk or key performance indicators

n Determine critical limits

n Notify responsible manager if indicator breaksthrough limits


Self Assessment

Capture of Losses







• Board Reporting







Key Risk Indicators

Process Mapping

Strategy & Design



Self Assessment

Capture of Losses







• Board Reporting







Key Risk Indicators

Process Mapping

Strategy & Design


Building Blocks in Detail - Key Risk IndicatorsThe Key risk indicators need t be time effective, meaning the more due noticegiven the more effective the KRI in enabling losses to be avoided

Key Risk Indicators


What is it?

Why do we need it?

How does it work?

Compute Economic Capital per location,organizational unit or product line or per riskcategory such as technology, human resources,organization or external factors

n To aggregate and compare the operational riskbetween organizational entities

n To steer the businesses accordingly

n To measure overall performance (EVA, RaRoC)

n To allocate capital

n Perform self-assessment

n Assure quality of results

n Compute economic capital

n Validate with loss data and other statistics andnon-statistics


Self Assessment

Capture of Losses







• Board Reporting







Key Risk Indicators

Process Mapping

Strategy & Design



Self Assessment

Capture of Losses







• Board Reporting







Key Risk Indicators

Process Mapping

Strategy & Design


Economic Capital

Building Blocks in Detail - Economic CapitalThe evaluation of economic capital can be based on post analysis using loss data,or pre-analysis using the prognoses results gained from the self assessment


Realization Cycle

Deliverables:• OR Vision Paper• OR Corporate Policy• OR Management

Framework

• Application Decision• Org/ Prod/Loc Trees• Business process maps• Self-assessment

questionnaire• Operational loss

database• Economic capital

calculator• Customized

management reports

• Exposure prioritization• Mitigation strategy• Mitigation program plan

Vision/Strategy

Phase II

Approximate time in Months

Wor

k st

ream

s

Realisation /ImplementationIdentification, Measurement and Monitoring

Operational Risk Mitigation

Phase IIIPhase I

2 12 N

Governance

Bank Structure

Loss Data

SelfAssessment

KRI

EconomicCapital

Reporting

4 6 8 10

Strategy &Design

MitigationManagement

• Products/Processes

• Organization

• Location

Realisation and Implementation ApproachThe full implementation time-frame depends on the organization’soperational risk experience and operations complexity in terms ofproducts, organization and geography

Example

PackageSelection Build

Buy


Self Assessment

Capture of Losses







• BoardReporting





• Independ -ent Review


Key Risk Indicators

Process Mapping

Strategy &Design



Agenda




n OR Solution Overview - ORTOS

n Summary


Capco’s building block approach supports the basic, the standard and theAdvanced Management approach (AMA) methodologies.

Thereby offering an encompassing and made to fit solution with the rightsoftware to match the clients needs

Align the blocks to Risk Management Software Solutions on themarket , depending on a financial institutions business requirementsand project lifecycle


Self Assessment

Capture of Losses







• BoardReporting







Key Risk Indicators

Process Mapping

Strategy &Design


Business Building Blocks

+ KRI, EC & Reporting -Full Solutions

•Raft Radar

•SWORD

•ORTOS* - Incl. Process Mapping•Interexa* - Incl. Process Mapping

Process Mapping• Operational Risk Workbench

• J-PORT• GORMS

• C4i™

• Finesse

• Principia System forOperational Risk

• Macgregor Financial TradingPlatform (MFTP)

• SAP

+ Loss Database•Accord•Active Risk Manager

•CARD®map

•Enterprise Risk Management•EQECAT

•Operational Risk Co-Assessor(ORCAS)•OpRisk Analytics, LLC

•OpVision

•GFT Clarity

Self Assessment•Accord

•Active Risk Manager•CARD®map

•Enterprise Risk Management

•EQECAT

•Operational Risk Co-Assessor(ORCAS)

•OpRisk Analytics, LLC

•OpVision•GFT Clarity

Example

s

Market Software Solution


ORTOS Operational Risk Tool Suite – Modules OverviewORTOS offers a complete corporate wide solution for Basel II OR and relatedManagement needs on a tried, tested and implemented platform

STORM

TESSA

ORECG

OLD

KO

RIS

ORMIS

STORM -Support Tool for OR Mapping

TESSA -Technical Structured Self-Assessment

GOLD -Global OR Loss Database

KORIS -Key Operational Risk Indicator System

OREC -Operational Risk Economic Capital

ORMIS -OR Management Information System

ORTOS


STORM - Key Functionality'sProcess Mapping

Administration of trees fororg-units, locations, products and risk categories

Administration of trees fororg-units, locations, products and risk categories

Mapping of StandardBusiness Lines asrequired by Basel II

Mapping of StandardBusiness Lines asrequired by Basel II

Visualisation of organisationVisualisation of organisation

Inventory of productsand processesInventory of productsand processes

Comfortable user interfacewith drag & dropComfortable user interfacewith drag & drop

STORM(Product Flow Mapping)

OREC(OR Economic Capital)

GO

LD(L

oss

Dat

abas

e)

KO

RIS

(Key

Ris

k In

dic

ators

)

ORMIS(OR Management Info. System)

TESSA

(Str

uct

ure

d S

elf

Ass

essm

ent)


GOLD - Key Functionality'sOperational Loss Collection / Analysis

Collection of allloss detailsCollection of allloss details

Graphical management reportsGraphical management reports

Loss categorisationLoss categorisation

Correct assignment, split and grouping of losses to org-units,location, product

Correct assignment, split and grouping of losses to org-units,location, product

Support of theorganisationalworkflow

Support of theorganisationalworkflow



GO

LD(L

oss

Data

base

)

KO

RIS

(Key

Ris

k In

dic

ators

)


TES

SA

(Str

uct

ure

d Sel

f

Ass

essm

ent)


TESSA - Key Functionality'sStructured Self-Assessment

Answering ofquestionnairesAnswering ofquestionnaires

Report selection &Risk reportingReport selection &Risk reporting

Set-up of questionnairesand administrationSet-up of questionnairesand administration

Identification &adminstration of usersIdentification &adminstration of users



GO

LD(L

oss

Dat

abas

e)

KO

RIS

(Key

Ris

k In

dic

ators

)


TESSA

(Str

uct

ure

d S

elf

Ass

essm

ent)


KORIS - Key Functionality's Key Risk Indicators

GraphicalKRI developmentGraphicalKRI development

Extensive search functionExtensive search function

Action steeringAction steering

Specific definition of indicators fororg-unit, location, product or process

Specific definition of indicators fororg-unit, location, product or process

Definition of individualwarning and critical levelsDefinition of individualwarning and critical levels



GO

LD(L

oss

Dat

abas

e)

KO

RIS

(Key

Ris

k In

dic

ators

)


TES

SA

(Str

uct

ure

d Sel

f

Ass

essm

ent)


OREC - Key Functionality'sOperational Risk Economic Capital

Choice of parameters of the model dependent on the individual risk profileChoice of parameters of the model dependent on the individual risk profile

Stable, robust, consistent & reliable modelStable, robust, consistent & reliable model

Monte Carlo-simulationMonte Carlo-simulation

Computation of regulatoryand economic capitalComputation of regulatoryand economic capital



GO

LD(L

oss

Dat

abas

e)

KO

RIS

(Key

Ris

k In

dic

ators

)


TESSA

(Str

uct

ure

d Sel

f

Ass

essm

ent)



GO

LD(L

oss

Dat

abas

e)

KO

RIS

(Key

Ris

k In

dic

ators

)

KO

RIS

(Key

Ris

k In

dic

ators

)



TESSA

(Str

uct

ure

d Sel

f

Ass

essm

ent)


ORMIS - Key Functionality'sManagement Reporting

Access and compare assessments, losses, and indicators of operational risks in one goAccess and compare assessments, losses, and indicators of operational risks in one go

Adminster user for several modules only onceAdminster user for several modules only once



GO

LD(L

oss

Dat

abas

e)

KO

RIS

(Key

Ris

k In

dic

ato

rs)


TESSA

(Str

uct

ure

d S

elf

Ass

essm

ent)



GO

LD(L

oss

Dat

abas

e)

KO

RIS

(Key

Ris

k In

dic

ato

rs)

KO

RIS

(Key

Ris

k In

dic

ato

rs)


TESSA

(Str

uct

ure

d S

elf

Ass

essm

ent)


Agenda





n Summary & Capco‘s Service and Solution offering


Solution Overview - ORTOS Operational Risk Tool SuiteFurthermore, Capco has jointly developed a comprehensive and proven solution,which covers all aspects and functions for a successful implementation of theAdvanced Management Approach (AMA)

• Capco & ORTOS provide an encompassing solution, not only fulfilling the requirements set by Basel II, butalso enabling financial institutions to identify the source of loss and risk resulting from technology, people,process and external events

• The combined business and technology solution offers a structured approach to loss aggregation andevaluation, structured self assessment and risk identification, risk indicator management and economiccapital, RaRoC and EVA evaluation on the basis of the AMA (Advanced Management Approach)

• Capco provides experienced operational risk professionals with ORTOS product knowledge, able toimplement both the solution and realize the economic benefits of implementing an AMA.

Capco OR Implementation Approach

STORM

TESSA

OREC

GO

LD

KO

RIS

ORMIS

Modular System ORTOS

+ =Operational

Risk Solution,fulfilling

OperationalRisk BAR II

requirements


Self Assessment

Capture of Losses







• Board Reporting







Key Risk Indicators

Process Mapping

Strategy & Design



OR Health Check - By Region or Business Line

Assessment on overall Ops Risk environment

n Prioritized analysis of control gaps and weaknesses

nWhen, where and how to invest in the development of an operational risk function

Perform Level I Risk & Control Assessment Produce OR scorecard Complete Level II Risk &

Control Gap Analysis

Step 1 Step 2 Step 3 AssessmentReport

n Interview discussions with relevant employees to determine breadth and depth of detailed Level II analysis

nDetailed analysis of ‘as is’ Ops risk control environment by topic :

n Strategy and plann Organisational designn Business mappingn Technology & processn Culture & outsourcing

n Scorecard provides a comparative rating based on proprietary risk scoring methodology

n Scope of detailed Level II analysis

n Identification of immediate control gaps

n OR readiness scorecard for:n Overall Ops risk

environment

n Each topic arean Specific high risk items

n Level II Risk and Control matrix provides risk scoring of the process flows by comparing existing controls vs.expected controls

Act

ivit

ies

Del

iver

able

s

Ops risk HealthcheckOps risk Healthcheck

Operational risk scorecard

S e r v i c e

Level P roce s s PeopleClientseg . 2Trad ing Sales

C l i e n t r e l a t i o n s h i p

A c c o u n t s e t u p

S t a t i c d a t a m a n a g e m e n t

T r a d e b o o k i n g / c o n f i r m sE x c e p t i o n p r o c e s s i n g

O p e r a t i o n s c o n t r o l

Fails management

I n v e n t o r y m a n a g e m e n t

Interest claims

C l e a r i n g & S e t t l e m e n t

R e c o n c i l i a t i o n

Serv

ices

Clients e g. 1

GAPS RELATED TO

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Where

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S y s t e m sI n c o m e p r o c e s s i n g

S t o c k L e n d i n g … … … … … … … … … … … .

M a r g i n i n g / C o l l a t e r a l M a n a g e m e n t … … . .

F o r e i g n e x c h a n g e … … … … … … … … …C a s h m a n a g e m e n t

O r d e r E x e c u t i o n … … … … … … … … … … .E x t e r n a l M e s s a g i n g … … … … … … … … …

F e e s … … … … … … … … … … … … … … … . .

C r e d i t R i s k C o n t r o l … … … … … … … … … .

M a r k e t R i s k C o n t r o l … … … … … … … … …

Real time position keepingC o n f i r m a t i o n … … … … … … … … … … … … .

Market Reconci l iat ion…………………….

P r i c e / V a l u a t i o n S u p p o r t … … … … … … … . .Security/Deriv Settlement/Clearing……..

Po r t f o l i o r epo r t i ng

R e p o r t i n g / E n q u i r y … … … … … … … … … …R i s k m a n a g e m e n t … … … … … … . .

A c c o u n t i n g … … … … … … … … … … … … …

Fund administration

C o r p o r a t e a c t i o n s

x

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m a p p i n g b u s i n e s s r e q u i r e m e n t s

with technology capab l i t i l y

T e c h n i c a l s u m m a r y :

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F e e s … … … … … … … … … … … … … … … . .








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A c c o u n t i n g … … … … … … … … … … … … …

Fund administration


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Tax monitoring

xa

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Realisation Cycle

Vision/ Strategy

Phase II

Approximate time in Months

Wor

k st

ream

s

Realisation /ImplementationIdentification, Measurement and Monitoring

Operational Risk Mitigation

Phase IIIPhase I

2 12 N

Governance

Bank Structure

Loss Data

Self Assessment

KRI

Economic Capital

Reporting

4 6 8 10

Strategy & Design

MitigationManagement

• Products/ Processes

• Organization

• Location

Operational Risk Framework – Understandingthe regulatory requirements, client impact andstep-by-step solution approach

Evaluate present status and identify gaps -recommend opportunities and solutions

Based on building block approach anddependant on the clients appetite and needs

Operational RiskTraining

Operational RiskProject

Health Check

ProjectRealization and Implementation

Overview of Capco's Offering in Operational RiskDepending on the customers experience and needs, Capco offers different servicesaddressing all stages of the client's Operational Risk lifecycle – starting with understandingthe issues & impacts over developing a solution, through to realization & implementation ofthe chosen approach

Enables clients to understand theirorganisation readiness regarding the Basel IIregulatory requirements

Basel II Requirements

Check-up

Operational Risk Vision and

StrategyOperational Risk Design

Operational Risk Implemenation

Definiton Approach Organsiation Design

Regulatory Capital

Business Mapping

Cultural Assessment

Outsourcing Impact

Technology Infrastructure

Operational Process

5 4 2 4 1 2 2 2 2

3 2 2 2 1 2 1 1 1

2 1 2 1 2 2 1 1 1

1 1 1 1 1 1 1 1 1

1 1 1 1 1 1 1 1 1

1 1 1 1 1 1 1 1 1

1 1 1 1 1 1 1 1 1

1 1 1 1 1 1 1 1 1

1 1 1 1 1 1 1 1 1

1 1 1 1 1 1 1 1 1

1. The board is aware of major aspects of operational risk and strategies

2. Senior Management is responsible for implementing Operational Risk

3. Information roles play a key role in an Operatinal Risk Framework

4. Identify Operational Risk in Products, Activities, Processes and Systems

6. Information roles play a key role in an Operatinal Risk Framework

5. Establish a Process for measuring Operational Risk

7. Define Policies, Processes and Procedures to control and mitigate Operational Risk

8. Require Banks to have an effective System to identify, monitor and control OpRisk

9. Regular independent evaluation of bank Strategies, Policies, Procedures and Practices

10. Make sufficient public Disclosure of Operational Risk Exposure and Quality

Principles 1 - 5 Principles 6 - 8 Principles 9-10 Principles 11- 12 Principles 13-18 Principles 19-21 Principles 22- 23 Principles 24- 27 Principles 28- 30Developing an appropriate Risk Management Environment

BIS Sound Practicesfor the Management &Supervision of OpRisk

Risk Management Identification, Measurment, Monitoring and Control

Role of Supervisors and Disclosure

Regulatory & Mgmt.Reporting

Underlying Structure of OR ApproachOrganization/Location/Products/Processesand Projects

OPERATIONAL RISK FRAMEWORK

PROJECT APPROACH & REALIZATION

BUSIN

ESS

AND

TECH

NICAL

MET

HODIC

AL A

PPRO

ACH

Evaluation of Unexpected Operational Risk(Calculation of Economic Capital)

Benchmark & Back test

(Loss Data Base)

Self Assessment(Questionnaire)

Monitoring and Management

(KRI)

Regulatory & Mgmt.Reporting

Underlying Structure of OR ApproachOrganization/Location/Products/Processesand Projects

OPERATIONAL RISK FRAMEWORK

PROJECT APPROACH & REALIZATION

BUSIN

ESS

AND

TECH

NICAL

MET

HODIC

AL A

PPRO

ACH

Evaluation of Unexpected Operational Risk(Calculation of Economic Capital)

Benchmark & Back test

(Loss Data Base)

Self Assessment(Questionnaire)

Monitoring and Management

(KRI)


SummaryCapco has developed a unique value proposition to fulfil the Basel II operationalrisk requirements - and more

n End-to-End corporate wide solution for the fulfilment of the Basel IIoperational risk requirements

n Building block approach, delivered by experienced industrypractitioners with clear deliverables and benefits for each stage

n Unique culmination of self-assessment, KRI and loss data approachalong process and project profiles, creating:

n Optimal risk transparency within operations, locations and business lines

n Enabling qualified investment decisions to mitigate risk - Scorecardreporting

n Unique culmination of a specific solution and approach aligned toaddress and resolve the complete operational risk mandate

n Capco offers a row of business and IT solutions, which enable financialinstitutions to better mitigate their operational risk


Contact

Maurizio BradlawPrincipal Consultant

T +49 69 97 60 91 62F +49 69 97 60 90 01Mobile +49 172 879 34 [email protected]

CapcoMesseturmFriedrich-Ebert-Anlage 4960308 Frankfurt am MainGermanyT +49 69 97 60 90 00F +49 69 97 60 90 01www.capco.com

Danny ShamhongManaging Principal

T +44 207 367 1092F +44 207 367 1001Mobile +44 7880 740 [email protected]

Capco14-18 Gresham StreetClements HouseLondonGT LONEC2V7JET +44 20 7367 1000F +44 20 7367 1001www.capco.com


„Bungee jumpers, sky divers and Indy 500 drivers arein the business of taking risk. Bankers are in thebusiness of managing risk .“

John D Hawke Jr, Controller of the Currency, USA, 5 May 1999

Thank you!

Operational Risk Management is a business challenge !Not solely a compliance issue


Documents

Operational Risk Management - Oracle · Operational Risk Management Fulfilling Basel II Requirements and Enhancing Business Control ... over solution to mitigation incl. Loss DB,