Day One

09.00 - 09.15 Welcome and Introduction

Session 1: The Current Risk Landscape and State of Operational Risk Management

• Analyzing the drivers of change in the risk landscape in which banks operate and the implications for operational risk management
• The essentials of effective risk quantification
• The DNA of risk measurement... simple tests that can be applied to evaluate the reliability of risk models and other risk quantification techniques

Case study and exercise: Delegates analyze the risk environment in which their firms operate and identify the principal threats that could give rise to material unexpected losses

Session 2: An Examination of Conventional Operational Risk Management Tools & Techniques

• Today�s operational risk management toolkit� what are the alternative approaches, best practices, benefits and limitations:
  • Process & control mapping
  • Risk & control self assessments
  • Risk registers
  • Key risk indicators (KRIs)
  • Loss distribution analysis
  • Scenario analysis and stress testing
  • Causal modeling

12.00 - 13.00 Lunch

Session 3: Internal Loss Data Capture

• Understanding the importance of loss event capture and what it is used for
• Designing a loss event database� minimum data requirements
• Sample loss event categorizations and their treatment in the loss event database
• How to calculate the financial impact of loss events
• A summary of the Basel II loss event types
• Understanding the boundaries between operational risk loss events and market and credit risk loss events

Case study and exercise: Delegates are provided with operational risk event / loss scenarios which they analyze and then determine the applicable Basel II loss event category and what data should be recorded in the loss event database.

Session 4: Deconstructing & Analyzing the Operating Environment as a Prerequisite to the Implementation of an Operational Risk Reporting Framework

• What is a business component and how should they be categorized relative to the creation of an operational risk reporting framework:
  • Transaction processing units
  • Risk management functions
  • Reference data maintenance units
  • Business applications (IT) maintenance units
  • Administration & support functions
• Understanding the three pillars of business components and how their flawed interaction creates exposure to risk:
  • Manual processes
  • Automated processes
  • Data
• Understanding the correlation between risk and efficiency and establishing the benchmark for optimal operating environments
• Measuring deviations from the benchmark and the consequences for operational risk management

Case study and exercise: Introducing and reviewing the �Safe Bank� case study that will be further used on Day 2. Delegates analyze and critique Safe Bank�s business operating model.

Day Two

Session 5: The Basel Operational Risk Framework and Why It Failed to Prevent Losses

• The evolving capital accords in relation to operational risk management
• Basel II requirements for operational risk
  • Basic Indicator Approach
  • Standardized Approach
  • AMA Requirements
• An overview of the BCBS sound practices papers:
  • Principles for the sound management of operational risk
  • Supervisory guidance for the advanced measurement approaches
• Industry perspectives on approaches to operational risk management: assessment vs. measurement
• An analysis of recent major unexpected losses suffered by banks and why their operational risk management tools and techniques failed to prevent them

Session 6: Exposure to Operational Risk � New BCBS Data Aggregation Requirements

• An overview of the BCBS consultative paper �Principles for Effective Risk Data Aggregation and Risk Reporting�

• Understanding the regulators� expectations and the implications for banks
• The need for measurement based operational risk management systems� what are the alternatives

12.00 - 13.00 Lunch

Session 7: Constructing a Direct and Dynamic Operational Risk Exposure Measurement and Reporting System

• Understanding how exposure to operational risk is created
• Designing an operational risk exposure measurement system� identifying the causal factors that drive operational losses
• The core metrics that underpin the measurement system and how they are calculated
• Constructing the measurement system�s tables� the �Value Table� and operational �Activity Table�
• Translating best practice risk mitigation techniques into �Best Practice Scoring Templates�
• Populating and running the operational risk quantification model

Case study and exercise: Delegates analyze a real-life business operating model and calculate quantitative and qualitative operational risk metrics that are used to produce Operational Risk MI. The outputs are subsequently evaluated and critiqued.

Session 8: The Application of the Exposure Measurement System in the Operational Risk Management and Reporting Framework

• Reconciling operational risk data to the general ledger through �Risk Accounting�
• Using the operational risk core metrics for risk appetite setting and monitoring, capital calibration and scenario analysis
• How to associate operational risk measurements with external risk measurements (credit, market, liquidity, interest rate etc) to produce a fully integrated risk reporting system

Case study and exercise: Delegates conduct an analysis of the DNA of the new operational risk measurement system and conclude on: (1) its value-added relative to the current / Basel II approach; and (2) its risk mitigation capabilities relative to the threats of major unexpected loss identified on Day 1.

Summary, Evaluation and Termination of the Seminar