Operational Risk Management

60 Hours / 3 Months / Mentor Supported

Course Overview:

Changes in markets, techniques, technologies, and products have altered the landscape of Operations and fueled the explosive development of Operational Risk management. The regulators of financial and public companies are demanding a far greater level of disclosure and awareness by directors about the risks they manage and the effectiveness of the controls they have in place to reduce or mitigate these risks. There is also a greater realization that a major source of earnings volatility can be attributed to the way a firm operates and not “financial risk”. All these changes have triggered the need for an efficient Operational Risk Management system in organizations.

Course Outline:

Introduction to Operational Risk
  • Objectives
  • Defining operational risk
  • Significance of operational risk
  • Operational risk management programs
  • Addressing operational risk
  • Measuring and modeling operational risk
Basic Concepts
  • Objectives
  • Loss events
  • Risk Factors, loss types and event/ factor controllability
  • Dependencies between Risk Factors and Events
  • Attribution of Loss
Regulatory Treatment of Operational Risk under Basel-II
  • Objectives
  • Introduction, Definitions and data issues
  • Measurement Methodologies
  • Role of Pillars 2 and 3
  • Sound Practices
Operational Risk in Various Banking Sectors
  • Objectives
  • Introduction and Spectrum of Risks
  • Accounting policies, costing and pricing models
  • Private banking sector
Operational Risk in insurance
  • Objectives
  • Introduction
  • Risks exclusive to insurance and Regulatory Issues
  • Alternative Risk Transfer and Finite Risk Captives
  • Captives
Developing objectives and identifying risks
  • Objectives
  • Risk Management Agenda
  • Risk Management Targets
  • Risk Management Organization and Policies
  • Benchmarking Internal Processes and Resources
  • Identifying Process and Resource Risks
  • Identifying Risk Factors
  • Identifying and Categorizing Loss Events
Estimating potential losses – Data
  • Objectives
  • Challenges to Operational Risk analysis
  • General measurement techniques
  • Historical analysis
  • Subjective risk assessment
Estimating potential losses – Loss distributions
  • Objectives
  • Overview of probability distributions
  • Building a distribution
  • Probability distributions
  • Estimating risk factors
  • Choosing an event distribution
  • Operational Risk database
Analyzing risks
  • Objectives
  • Aggregating risks
  • Monte Carlo loss simulation
  • Risk management alternatives
  • Analyzing loss events
  • Analyzing risky processes and resources
  • Analyzing risk factors
Loss prediction and prevention
  • Objectives
  • Loss prediction
  • Loss prevention
  • Process reengineering and work restructuring
  • Product redesign and automation
  • Human factors engineering
  • ERP and reliability maintenance
Loss control
  • Objectives
  • Introduction
  • Diagnostic controls and Inventory management
  • Redundant systems and boundary systems
  • Computer security and physical security management
  • Internal and external audit
Loss reduction and risk avoidance
  • Objectives
  • Legal risk reduction and loss isolation
  • Contingency Planning
  • Crisis Management
  • Risk avoidance
  • Quality management
  • Human resources management
  • Organizational design, Culture and relationship management
Risk financing
  • Objectives
  • Introduction
  • Financial restructuring
  • Asset-Liability Management
  • Corporate diversification
  • Insurance
  • Self-Insurance
  • Hedging using derivatives
  • Contractual risk transfer
Measurement framework
  • Objectives
  • ORM cycle
  • Framework criteria and assumptions
  • Current framework approaches
  • Measurement process for ORM
  • Delta and EVT methodologies
ORM in practice
  • Objectives
  • Learning and response loops
  • Guidelines for effective reporting
  • Event reports and Operational profiles
  • Risk reports
  • Evaluating and updating the risk model
  • Implementing bank-wide ORM
Enterprise-wide Risk Management (ERM)
  • Objectives
  • Role of technology
  • Enterprise-wide risk information systems
  • Challenges to ERM
  • Project Management for an ERM system
Basic and causal models
  • Objectives
  • Operational Risk Management (ORM) model
  • Top-down risk models
  • Bottom-up risk models
  • Selecting a risk model
  • Causal models
Legal risk and taxation rules
  • Objectives
  • Introduction
  • Contract enforcement
  • Board of directors and shareholder activism
  • Management responsibility for legal risk
  • Transparency and collateral
  • Shifting ground in international taxation
E-banking
  • Objectives
  • Introduction
  • Operational risks associated with Electronic Banking
  • Security risk
  • Systems design, implementation, and maintenance flaws
  • Customer misuse of products and services
Systems and software
  • Objectives
  • Introduction
  • Framework/Components of an operational risk system
  • Operational risk software
  • AMELIA
  • MICROBANK
  • Relex software
  • ALGORITHMICS
Case study Barings
  • Objectives
  • Overview
  • How the massive losses were incurred
  • Lessons to be drawn from the incident

All necessary materials are included.


System Requirements:

Internet Connectivity Requirements:
  • Cable and DSL internet connections are recommended.

Hardware Requirements:
  • Minimum Pentium 400 Mhz CPU or G3 Macintosh. 1 GHz or greater CPU recommended.
  • 256MB RAM minimum. 1 GB RAM recommended.
  • 800x600 video resolution minimum. 1025x768 recommended.
  • Speakers/Headphones to listen to Dialogue steaming audio sessions.
  • A microphone to speak in Dialogue streaming audio sessions.
Operating System Requirements:
  • Windows Vista, 7, 8, 8.1, 9, 10
  • Mac OSX 10 or higher.
  • OpenSUSE Linux 9.2 or higher.
Web Browser Requirements:
  • Google Chrome is recommended.
  • Firefox 13.x or greater.
  • Internet Explorer 6.x or greater.
  • Safari 3.2.2 or greater.
Software Requirements:
  • Adobe Flash Player 6 or greater.
  • Oracle Java 7 or greater.
  • Adobe Reader 7 or greater.
Web Browser Settings:
  • Accept Cookies
  • Disable Pop-up Blocker.


**Outlines are subject to change, as courses and materials are updated.**