Introduction to Operational Risk Assessment

1. Introduction & Overview
Paulus Tangkere
Operational Risk Analysis
Session 1

2. pt
Course Goals
This course is designed to help students
understand the operational risk and analyze
its applications in real organizations using
the practical framework of identifying,
assessing and managing operational risk.

3. pt
Course Objectives
• To develop an understanding on operational risk, how it can
be measured and transferred, why both individuals and
corporations care about operational risk.
• To improve skills to apply the operational risk management
process to major areas of concern for organizations:
operational excellence, in some detail.
• To gain experience with steps in using the practical framework
in identifying, assessing and managing operational risk in a
real organizations.
By the end of semester, students should analyze and present in
class an operational risk analysis in a real organization.

4. pt
Syllabus
1. Introduction and Overview
2. Operational Risk Management
3. System Operation Analysis
4. Operational Risk Identification
5. Operational Risk Analysis
6. Operational Risk Evaluation
7. Review I

5. pt
Syllabus-cont
8. Operational Risk Assessment Tools
9. Operational Risk Treatment
10. Implementation and Improvement System
11. Group Presentation I
12. Group Presentation II
13. Group Presentation III
14. Review II

6. pt
Presentation Slides
• Cover
– Course Code and Name
– Group/Project Title
– Session Number and Date
– Members and Roles
1. Group Plan and Progress Summary
2. Progress of the Week
3. Lesson Learned
4. Next Activity Plan

8. pt
References
• Chapman, Robert J., Simple Tools and
Techniques for Enterprise Risk Management.
John Wiley & Sons, 2006.
• --- ISO 31000: Risk Management – Principles
and Guidelines. First Edition. ISO, 2018
• --- ISO 31010: Risk Management – Risk
Assessment Techniques. Final Draft. ISO, 2009
• Milliman Research Report, Operational Risk
Modeling Framework, February, 2013.

9. pt
Methodology
• Lectures
• Readings
• Case Studies
• Assignments

10. pt
Grading
• Midterm : 30%
• Final : 40%
• Others : 30%
– Assignments – individual and group
– Class Participation
– (Course) Session Summary
– Quiz – pretests and posttests

11. pt
Assignment Submission
• No copy-paste.
• Submit electronically (email)
– to ptforbu@yahoo.com
– Use specified format: kmk-nim/kel-tgs both in
Subject and File Name
– 2 (two) days before next class.
• Group Presentations materials – a week
before schedule

12. pt
Group
• Consists of max. 5 students
• Responsibilities
– Distributed
– Team
– Personal/Individual
• Internal communications

13. pt
Communication
ptforbu@yahoo.com
Format: kmk-nim/kel-tgs
kmk = kode mata kuliah
nim = nomor induk mahasiswa atau
kel = kelompok
tgs = nama tugas

14. pt
What is Risk?
“effect of uncertainty on objectives” (ISO 31000)
“ Risk is the chance of an event happening that
could lead to unintended effects which will
impair the organization’s ability to achieve its
objectives”.

15. pt
All activities of an organization
involve risk.
• Organizations of all types and sizes face
internal and external factors and influences
that make it uncertain whether and when
they will achieve their objectives. The effect
this uncertainty has on an organization's
objectives is “risk”.

16. pt
Causes of Risk
• Change - The “Mother”
of Risk
• Resource Constraints
• New Technology
• Complexity
• Stress
• Societal Constraints
• Environmental
Influences
• Human Nature
• Speed/Tempo of
Operation
• High Energy Levels

17. pt
Risk Management
• A Decision Making Tool
• Increases Ability to Make Informed Decisions
• Reduces Risks to Acceptable Levels

18. pt
Operational Risk
• the potential for loss due to failures of people,
processes, technology and external
dependencies.
• “Operational risk is the risk of loss resulting
from inadequate or failed internal processes,
people and systems or from external events”
(Basel Committee on Banking Supervision
2004).

19. pt
Hazard:
A condition with the
potential to cause personal
injury or death, property
damage, or mission
degradation.
ORM Terms

20. pt
ORM Terms
Risk:
An expression of possible loss
in terms of severity and
probability.

21. pt
Hazard Risk
Bad Weather High Probability
Flight Ops Cnx
Flock of Birds Moderate Chance
of Engine Fault
Walking on top
of Slippery AC
Some Chance of
Fall Producing
Severe Injury

22. pt
Severity:
The worst credible
consequence which can occur
as a result of a hazard.
ORM Terms

23. pt
Probability:
The likelihood
that a hazard will result in a
mishap or loss.
ORM Terms

24. pt
Operational Risk Management
Goal:
To optimize operational capability
and readiness by managing risk to
accomplish the mission with minimal
loss.

25. Thanks
Paulus Tangkere
Operational Risk Assessment
End of Session 1