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Governance, Risk, and Compliance Handbook: Technology, Finance, Environmental, and International Guidance and Best Practices by Anthony Tarantino

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CHAPTER 17

OPERATIONAL RISK MANAGEMENT IN FINANCIAL SERVICES

Anthony Tarantino, PhD

17.1 INTRODUCTION

(a) Rating Agency Requirements

17.2 APPROACHES TO OPERATIONAL RISK MANAGEMENT

(a) The Basic Indicator Approach (BIA)

(b) The Standardized Approach (TSA)

(c) The Alternate Standard Approach (ASA)

(d) The Advanced Measurement Approach (AMA)

17.3 BANKING DOCUMENTATION

17.4 OPERATIONAL RISK TOOLS OVERVIEW

(a) Qualitative Tool: Risk Control Self-Assessment (RCSA)

(b) Qualitative Tool: Scorecards

(c) Qualitative Tool: Key Risk Indicators

(d) Qualitative Tool: Scenarios

(e) Quantitative Tool: Internal Loss Data

(f) Quantitative Tool: External Data

17.5 U.S. NPR: AMA APPROACHES FOR OPERATIONAL RISK

(a) Background

(b) Operational Risk Management

(i) Governance

(ii) Board of Directors and Management Oversight

(iii) Firmwide Operational Risk Management Function

(iv) Line of Business Management

(v) Reporting

(c) Operational Risk Data and Assessment

(i) Capture and Maintenance of Elements

(ii) Internal Operational Loss Event Data

(iii) External Operational Loss Event Data

(iv) Scenario Analysis

(v) Business Environment and Internal Control Factors

(d) Operational Risk Quantification

(i) Analytical Framework

(ii) Eligible Operational Risk Offsets

(iii) Unit of Measure

(iv) Accounting for Dependence

(v) Risk Mitigation

(vi) Alternative Approaches for Depository Institutions

(vii) Documentation of Operational Risk Quantification Systems

NOTES

17.1 INTRODUCTION

Banking is at the forefront of the ...

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