OPERATIONAL RISK TRAINING COURSE - DURATION 3 DAYS

Methodology
This will be a combination of classroom based tuition and case studies.

Course Outline

Day 1- Corporate Operational Risk Management

Session 1: Introduction to Corporate Operational Risk Management

• What is operational risk?
• Relationship to other risk classes
• The role of the Board
• The role of the Audit Committee
• The role of non-executive directors
• The responsibilities of the operational risk management function
• Matrix management
• The relationship to the internal audit and legal functions
• What is risk appetite or risk tolerance, how is it calculated and how is it distributed within a business?

Case Study: Review the published structures of listed companies and consider what structures are appropriate for companies of differing sizes

Case Study: Calculation of risk appetite

Discussion question: To what extent should risk appetite be used for economic capital modelling within a business?

Session 2 – Development of an Operational Risk Framework

• Development of operational risk policies
• Development of an operational risk framework
• The importance of flowcharting procedures
• Business process modelling
• Identification of key controls

Case Study: Flowcharting of business processes

Session 3 – Development of key process and risk indicators

• What is a key process indicator?
• What is a key risk indicator?
• How to design key risk or performance indicators?
• How many indicators are suitable?
• Relationship to quality modelling systems
• Reporting of indicators and the balanced scorecard

Case Studies: Development of key risk indicators

Discussion Question: How many indicators might be suitable for a company?

Day 2 – Corporate Operational Risk Management

Session 4 – The Risk Register

• What is a risk register?
• How should a risk register be developed?
• Prioritisation of risks
• Assessment of severity
• Assessment of likelihood

Case Study: Develop a key risks register

Case Studies: Assess severity and likelihood

Session 5 – Control and risk self assessment

• The role of control and risk self assessment within risk management
• The relationship of risk management to corporate governance
• Demonstration of a corporate governance product
• Presentation of a typical control and risk self assessment product
• How to implement control and risk self assessment in a corporate environment
• Consideration of cost and reward from controls
• Reporting control and risk self assessment
• What are the problems?

Discussion Question: Consider how to maintain adequate quality over the control and risk self-assessment process and what might be criteria identifying failures in the process

Case Study: Consider how to audit control and risk self-assessment

Session 6 – Non Goal Correlated Events

• What is a non-goal correlated event?
• Personal vs corporate risk appetite
• Unexpected profits and unexpected losses
• What is really unexpected?
• To what extent are events captured within product pricing?
• What is the role of capital?
• Maintenance of loss databases
• Relevance of loss data

Case Study: Consider why losses may not be relevant to an institution

Discussion question: To what extent do you intend to include losses within economic capital modelling?

Session 7 – Advanced Topics

• What is sensitivity analysis and how should it be conducted?
• What is stress testing?
• At what confidence level should stress testing be conducted?
• What is scenario modelling?
• How extreme should scenario modelling be?
• How does operational risk management relate to business continuity planning?
• What is the role of insurance
• How should outsourcing be considered?

Case Study: Sensitivity analysis

Case Study: Stress testing

Case study: Scenario modelling

Case Study: Business process modelling and cascading risk

Discussion question: To what extent is insurance included within operational risk management?

Session 8 – Building the final framework?

• How to build all the tools into a consistent framework
• How to combine this with economic capital modelling
• How to combine this with corporate governance and Sarbanes Oxley (US) rules in particular
• Conclusions

Discussion question: How much operational risk management is sufficient for a company?

Day 3 – Banking Operational Risk Management
Session 9 - The Structure of Operational Risk within Banking

• What is operational risk within banking?
• The Basel Accord options (updated for new rules)
• Calculating the operational risk capital charge under the basic and standardised approaches
• Boundary issues with credit risk and market risk
• Stages in building a operational risk framework
• Development of a risk appetite

Case Study: Calculation of risk appetite for a bank

Discussion question: How long should a risk framework be and how should it be kept up to date?

Session 10 - The Specific Building Blocks

• Risk identification
• Implementation of a risk register
• Assessing severity and likelihood
• Undertaking business process modelling
• Implementation of control and risk self assessment
• Development of Key risk indicators
• Impact of outsourcing

Case Study: Assessment of severity and likelihood for a bank

Case Study: Development of key risk indicators for a bank

Session 11 - Loss data analysis

• Internal loss database development
• The problems with internal loss data
• How to use external loss data
• Data scaling

Case Study: Development of a Basel compliant internal loss database

Session 12 - Stress Testing and Scenario Modelling

• Scenario modelling and lessons from the past
• Severe business continuity planning
• Stress testing within the banking community – what is currently undertaken?

Case Study: Lessons from major disasters

Case Study: Stress testing and scenario modelling in banks

State of the art facilities
Delegates can study in our comfortable hi-tech learning environment in London, near Liverpool Street Station.

Operational Risk

Course Venue: London EC2

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