a short description in mixed English and Bahasa Indonesia on Operational Risk Management and Measurement, in particular value at risk calculation using Monte carlo Simulation. Another method using EVT (Extree Value Theory) will be delivered shortly. regards
Operational Risk Management - Understanding Your Risk LandscapeEneni Oduwole
This presentation provides insights on how the proper implementation of Operational Risk Management can lead to effective risk profiling, analysis and mitigation. It introduces operational risk as a bedrock for meaningful risk management irrespective of which industry an organization plays in.
Operational Risk Management under BASEL eraTreat Risk
Operational risk have always ignored by Banks as they thought Credit and market risks can cause catastrophe. But history of misfortunes taught us different lessons. Controls and internal audit have long been construed as guard till BASEL II dictates forced banks to look with insight. Understand the dimension of ORM in this presentation.
Operational Risk Management - Understanding Your Risk LandscapeEneni Oduwole
This presentation provides insights on how the proper implementation of Operational Risk Management can lead to effective risk profiling, analysis and mitigation. It introduces operational risk as a bedrock for meaningful risk management irrespective of which industry an organization plays in.
Operational Risk Management under BASEL eraTreat Risk
Operational risk have always ignored by Banks as they thought Credit and market risks can cause catastrophe. But history of misfortunes taught us different lessons. Controls and internal audit have long been construed as guard till BASEL II dictates forced banks to look with insight. Understand the dimension of ORM in this presentation.
Implementation of Enterprise Risk Management with ISO 31000 Risk Management S...PECB
The webinar covers:
• The start of any Enterprise Risk Management Program
• The approach to developing a framework that will assist organizations to integrate RM into their enterprise-wide risk management systems
• The relationship between the foundations of the risk management framework and their objectives
Presenter:
This webinar was presented by M. Youssef K, an executive consultant & trainer with several qualifications. He is an accomplished expert with over 10 years’ experience in the field of risk management, project and program management, PRINCE 2, Agile, EVM, business process analysis and design, as well as operational and organizational excellence.
Link of the recorded session published on YouTube: https://youtu.be/9fO-JqENL0I
Presentation från GRC 2014 den 15 maj. Kontakta gärna talaren om du har några frågor. Hela schemat för eventet hittar du här: http://www.transcendentgroup.com/sv/har-har-du-hela-schemat-for-grc-2014/
The Risk and Control Self Assessment (RCSA) is an integral part of most operational risk management frameworks. RCSAs provide a structured mechanism for estimating operational
exposures and the effectiveness of controls. In so doing RCSAs help organisations to prioritise risk exposures, identify control weaknesses and gaps, and monitor the actions taken to address any weaknesses or gaps.
A well designed and implemented RCSA can help to embed operational risk management across an organisation, improving management attitudes towards operational risk management and enhancing the overall risk culture. In contrast, an inefficient or unnecessarily complex RCSA can damage the reputation of the (operational) risk function and reinforce the perception that
operational risk management is a bureaucratic, compliance-focused, exercise that does not support the achievement of organisational objectives.
Learn more about Risk Management and the essentials with IRM’s level 1 certification.
https://www.theirmindia.org/level1
Level 1 qualified or risk management professionals with 2-3 years of experience can also enroll for level 2 certification.
https://www.theirmindia.org/level2
Visit: https://www.theirmindia.org/
Address: IRM India Affiliate, 907,908,909, Corporate Park II, 9th Floor, VN Puran Marg, Near Swastik Chambers, Chembur Mumbai 400071
Enterprise Risk Management (ERM) is the process of planning, organizing, leading, and controlling the activities of an organization in order to minimize the effects of risk on an organization's capital and earnings.
Enterprise Risk Management expands the process to include not just risks associated with accidental losses, but also financial, strategic, operational, and other risks.
In recent years, external factors have fueled a heightened interest by organizations in ERM.
Industry and government regulatory bodies, as well as investors, have begun to scrutinize companies' risk-management policies and procedures.
In an increasing number of industries, boards of directors are required to review and report on the adequacy of risk-management processes in the organizations they administer.
Since they thrive on the business of risk, financial institutions are good examples of companies that can benefit from effective ERM.
Their success depends on striking a balance between enhancing profits and managing risk.
In order for any enterprise to properly, effectively, and prudently manage their future growth, Business Strategy needs to be sustained by modern Enterprise Risk Management (ERM) principles and practices.
The Enterprise Risk Management discipline is not anymore a separate management profession or kinky management way, but rather it is a core competency that all organizations and executives must have in this Global Age. It should be a way of life for all.
This presentation provides a highlight of the key issues in the management of Market Risk. It touches briefly some of the elements of the Basel 2 Accord with respect to Market Risk
Strategic Risk Management as a CFO: Getting Risk Management RightProformative, Inc.
Video & Presentation: http://www.proformative.com/events/strategic-risk-management-cfo-getting-risk-management-right
Enterprise Risk Management should be simple. Unfortunately, companies are responding to regulators and business imperatives to improve their risk management practices, all the while aligning with business strategy and performance as well as capital allocation. Leading practitioners are seeking insight and value from risk management and are using risk management to focus audit and compliance activities. In fact independent research commissioned by SAP and others suggests many successful ERM initiatives still make little use of the increasingly sophisticated technology available. This session will summarize recent research by SAP and others on the state of ERM and will provide simple, practical strategies for how Finance can drive risk management practices that build success and add value.
Speakers:
Bob Tizio, GRC Officer-Americas, SAP America Inc.
Bruce McCuaig, Director, Solution Marketing for Governance Risk & Compliance, SAP
Presentation delivered at CFO Dimensions 2013 - http://www.cfodimensions.com
Track: Finance Technology | Session: 5
2017 coso-erm-integrating-with-strategy-and-performance-executive-summaryVALUES & SENSE
This update to the 2004 publication addresses the evolution of enterprise risk management and the need for organizations to improve their approach to managing risk to meet the demands of an evolving business environment. The updated document, titled Enterprise Risk Management—Integrating with Strategy and Performance, highlights the importance of considering risk in both the strategy-setting process and in driving performance.
PECB Webinar: Aligning ISO 31000 and Management of Risk MethodologyPECB
The webinar covers:
• ISO 31000 as the adopted standard, for ISO standards that have risk components, such as ISO 27005 and OHSAS 18001
• Description of Management of Risk (MoR) – how organizations can benefit
• Complementary values that ISO 31000 and MoR bring to each other
• How Risk Managers can evolve a practical approach to carrying out Risk Processes
Presenter:
This webinar was presented by PECB Trainer Orlando Olumide Odejide, an experienced Enterprise Architect and Chief Trainer for Training Heights Limited.
Implementation of Enterprise Risk Management with ISO 31000 Risk Management S...PECB
The webinar covers:
• The start of any Enterprise Risk Management Program
• The approach to developing a framework that will assist organizations to integrate RM into their enterprise-wide risk management systems
• The relationship between the foundations of the risk management framework and their objectives
Presenter:
This webinar was presented by M. Youssef K, an executive consultant & trainer with several qualifications. He is an accomplished expert with over 10 years’ experience in the field of risk management, project and program management, PRINCE 2, Agile, EVM, business process analysis and design, as well as operational and organizational excellence.
Link of the recorded session published on YouTube: https://youtu.be/9fO-JqENL0I
Presentation från GRC 2014 den 15 maj. Kontakta gärna talaren om du har några frågor. Hela schemat för eventet hittar du här: http://www.transcendentgroup.com/sv/har-har-du-hela-schemat-for-grc-2014/
The Risk and Control Self Assessment (RCSA) is an integral part of most operational risk management frameworks. RCSAs provide a structured mechanism for estimating operational
exposures and the effectiveness of controls. In so doing RCSAs help organisations to prioritise risk exposures, identify control weaknesses and gaps, and monitor the actions taken to address any weaknesses or gaps.
A well designed and implemented RCSA can help to embed operational risk management across an organisation, improving management attitudes towards operational risk management and enhancing the overall risk culture. In contrast, an inefficient or unnecessarily complex RCSA can damage the reputation of the (operational) risk function and reinforce the perception that
operational risk management is a bureaucratic, compliance-focused, exercise that does not support the achievement of organisational objectives.
Learn more about Risk Management and the essentials with IRM’s level 1 certification.
https://www.theirmindia.org/level1
Level 1 qualified or risk management professionals with 2-3 years of experience can also enroll for level 2 certification.
https://www.theirmindia.org/level2
Visit: https://www.theirmindia.org/
Address: IRM India Affiliate, 907,908,909, Corporate Park II, 9th Floor, VN Puran Marg, Near Swastik Chambers, Chembur Mumbai 400071
Enterprise Risk Management (ERM) is the process of planning, organizing, leading, and controlling the activities of an organization in order to minimize the effects of risk on an organization's capital and earnings.
Enterprise Risk Management expands the process to include not just risks associated with accidental losses, but also financial, strategic, operational, and other risks.
In recent years, external factors have fueled a heightened interest by organizations in ERM.
Industry and government regulatory bodies, as well as investors, have begun to scrutinize companies' risk-management policies and procedures.
In an increasing number of industries, boards of directors are required to review and report on the adequacy of risk-management processes in the organizations they administer.
Since they thrive on the business of risk, financial institutions are good examples of companies that can benefit from effective ERM.
Their success depends on striking a balance between enhancing profits and managing risk.
In order for any enterprise to properly, effectively, and prudently manage their future growth, Business Strategy needs to be sustained by modern Enterprise Risk Management (ERM) principles and practices.
The Enterprise Risk Management discipline is not anymore a separate management profession or kinky management way, but rather it is a core competency that all organizations and executives must have in this Global Age. It should be a way of life for all.
This presentation provides a highlight of the key issues in the management of Market Risk. It touches briefly some of the elements of the Basel 2 Accord with respect to Market Risk
Strategic Risk Management as a CFO: Getting Risk Management RightProformative, Inc.
Video & Presentation: http://www.proformative.com/events/strategic-risk-management-cfo-getting-risk-management-right
Enterprise Risk Management should be simple. Unfortunately, companies are responding to regulators and business imperatives to improve their risk management practices, all the while aligning with business strategy and performance as well as capital allocation. Leading practitioners are seeking insight and value from risk management and are using risk management to focus audit and compliance activities. In fact independent research commissioned by SAP and others suggests many successful ERM initiatives still make little use of the increasingly sophisticated technology available. This session will summarize recent research by SAP and others on the state of ERM and will provide simple, practical strategies for how Finance can drive risk management practices that build success and add value.
Speakers:
Bob Tizio, GRC Officer-Americas, SAP America Inc.
Bruce McCuaig, Director, Solution Marketing for Governance Risk & Compliance, SAP
Presentation delivered at CFO Dimensions 2013 - http://www.cfodimensions.com
Track: Finance Technology | Session: 5
2017 coso-erm-integrating-with-strategy-and-performance-executive-summaryVALUES & SENSE
This update to the 2004 publication addresses the evolution of enterprise risk management and the need for organizations to improve their approach to managing risk to meet the demands of an evolving business environment. The updated document, titled Enterprise Risk Management—Integrating with Strategy and Performance, highlights the importance of considering risk in both the strategy-setting process and in driving performance.
PECB Webinar: Aligning ISO 31000 and Management of Risk MethodologyPECB
The webinar covers:
• ISO 31000 as the adopted standard, for ISO standards that have risk components, such as ISO 27005 and OHSAS 18001
• Description of Management of Risk (MoR) – how organizations can benefit
• Complementary values that ISO 31000 and MoR bring to each other
• How Risk Managers can evolve a practical approach to carrying out Risk Processes
Presenter:
This webinar was presented by PECB Trainer Orlando Olumide Odejide, an experienced Enterprise Architect and Chief Trainer for Training Heights Limited.
Current Write-off Rates and Q-factors in Roll-rate MethodGraceCooper18
Under the current CECL standard introduced by Accounting Standards Updates (ASU) 2016-13, there are several measurement approaches that financial institutions can use to estimate expected credit losses. Among these, the Roll-rate method, which uses historical trends in credit write-offs and delinquency, is the most popular. Historical roll rates are used to predict ultimate losses.
Effektiv riskhantering - teori vs praktik - IBM Smarter Business 2011IBM Sverige
Presentation från IBM Smarter Business 2011. Spår: Hantera risk och säkerhet.
I dagens turbulenta värld är det av största vikt att identifiera och hantera risker. OpenPages är den världsledande lösningen för integrerad riskhantering (Governance, Risk and Compliance, GRC). Vad säger experterna om hur riskhantering ska implementeras, och hur har organisationer runt om i världen gjort i praktiken?
Talare: Johan Söderberg - OpenPages Ansvarig – IBM.
Mer information på www.smarterbusiness.se
Operational Risk : Take a look at the raw canvasTreat Risk
Operational risks by banks have never been recognised till BASEL II imposed on banks to look forward. Take a look at the broad canvas of Operational risks applicable for banks
Case 2.2INTRODUCTION 1Apple Inc. (Apple) is a worldwide provid.docxtidwellveronique
Case 2.2
INTRODUCTION 1
Apple Inc. (Apple) is a worldwide provider of innovative technology products and services. Apple’s products and services include iPhone®, iPad®, Mac®, iPod®, Apple TV®, a portfolio of consumer and professional software applications, the iOS and OS X® operating systems, iCloud®, and a variety of accessory, service and support offerings. The Company also sells and delivers digital content and applications through the iTunes Store ®, App Store™, iBooks Store™, and Mac App Store. Net revenue for fiscal 2013 was $170.9 billion and net income was $37.0 billion.
Apple’s common stock is traded on the NASDAQ national market, and Apple is required to have an integrated audit of its consolidated financial statements and its internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). The Company’s fiscal year is the 52 or 53-week period that ends on the last Saturday of September. As of the close of business on October 18, 2013, Apple had 899,738,000 shares of common stock outstanding with a trading price of $508.89.
INFORMATION ABOUT THE AUDIT
Your firm, Smith and Jones, PA., is in the initial planning phase for the fiscal 2014 audit of Apple for the year ended September 27, 2014. As the audit senior, you have been assigned responsibility for gathering and summarizing information necessary to evaluate Apple’s business risk. Your firm’s memorandum related to the client business risk evaluation has been provided to assist you with this assignment. Assume no material misstatements were discovered during the fiscal 2014 audit.
1 The background information about Apple Inc. was taken from Apple Inc.’s Form 10-K for the fiscal year 2013 filed with the Securities and Exchange Commission.
The case was prepared by Mark S. Beasley, Ph.D. and Frank A. Buckless, Ph.D. of North Carolina State University and Steven M. Glover, Ph.D. and Douglas F. Prawitt, Ph.D. of Brigham Young University, as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of an administrative situation.
REQUIRED
[1] Go to Apple’s website (investor.apple.com) and explore the website. Click on the “SEC Filings” link. Obtain the most recent SEC Form 10-K provided for Apple. Based on the information obtained from the website and your knowledge of the industry, prepare a memo discussing the following items:
[a] Apple’s:
■ Sales
■ Net income
■ Cash flow from operating activities
■ Total assets
■ Number of employees
[b] What are Apple’s products?
[c] Who are Apple’s competitors?
[d] Who are Apple’s customers?
[e] Who are Apple’s suppliers?
[f] How does Apple market and distribute its products?
[g] What is Apple’s basic business strategy (cost leadership or differentiation)?
[h] What are critical business processes for Apple ...
What are the main advantages of using HR recruiter services.pdfHumanResourceDimensi1
HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
India Orthopedic Devices Market: Unlocking Growth Secrets, Trends and Develop...Kumar Satyam
According to TechSci Research report, “India Orthopedic Devices Market -Industry Size, Share, Trends, Competition Forecast & Opportunities, 2030”, the India Orthopedic Devices Market stood at USD 1,280.54 Million in 2024 and is anticipated to grow with a CAGR of 7.84% in the forecast period, 2026-2030F. The India Orthopedic Devices Market is being driven by several factors. The most prominent ones include an increase in the elderly population, who are more prone to orthopedic conditions such as osteoporosis and arthritis. Moreover, the rise in sports injuries and road accidents are also contributing to the demand for orthopedic devices. Advances in technology and the introduction of innovative implants and prosthetics have further propelled the market growth. Additionally, government initiatives aimed at improving healthcare infrastructure and the increasing prevalence of lifestyle diseases have led to an upward trend in orthopedic surgeries, thereby fueling the market demand for these devices.
Explore our most comprehensive guide on lookback analysis at SafePaaS, covering access governance and how it can transform modern ERP audits. Browse now!
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Remote sensing and monitoring are changing the mining industry for the better. These are providing innovative solutions to long-standing challenges. Those related to exploration, extraction, and overall environmental management by mining technology companies Odisha. These technologies make use of satellite imaging, aerial photography and sensors to collect data that might be inaccessible or from hazardous locations. With the use of this technology, mining operations are becoming increasingly efficient. Let us gain more insight into the key aspects associated with remote sensing and monitoring when it comes to mining.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
As a business owner in Delaware, staying on top of your tax obligations is paramount, especially with the annual deadline for Delaware Franchise Tax looming on March 1. One such obligation is the annual Delaware Franchise Tax, which serves as a crucial requirement for maintaining your company’s legal standing within the state. While the prospect of handling tax matters may seem daunting, rest assured that the process can be straightforward with the right guidance. In this comprehensive guide, we’ll walk you through the steps of filing your Delaware Franchise Tax and provide insights to help you navigate the process effectively.
Attending a job Interview for B1 and B2 Englsih learnersErika906060
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Discover the innovative and creative projects that highlight my journey throu...dylandmeas
Discover the innovative and creative projects that highlight my journey through Full Sail University. Below, you’ll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
Unveiling the Secrets How Does Generative AI Work.pdfSam H
At its core, generative artificial intelligence relies on the concept of generative models, which serve as engines that churn out entirely new data resembling their training data. It is like a sculptor who has studied so many forms found in nature and then uses this knowledge to create sculptures from his imagination that have never been seen before anywhere else. If taken to cyberspace, gans work almost the same way.
2. What is Operational Risk?
The risk of loss resulting from inadequate or failed
internal processes, people and systems or from
external events (The Basel II Capital Accord)
FORMERLY any risk but market and credit risks
It is NOT a brand new stuff and it is the risk that affects
06/09/2013 2
It is NOT a brand new stuff and it is the risk that affects
all businesses
Operational risk is inherent in carrying out a process/
operational activity.
3. Classification of Operational Risks
Operational risk events are
classified by two factors:
frequency – how often the
event occurs
impact – the amount of the
High
Frequency
Low
Impact
High
Frequency
High
Impact
Frequency
06/09/2013 3
impact – the amount of the
losses resulting from the
event
Low
Frequency
Low
Impact
Low
Frequency
High
Impact
Frequency
Impact
4. Classification of Operational Risks
Generally, operational risk management focuses on only
two of these event types:
Low frequency / high impact (LFHI)
High frequency / low impact (HFLI)
06/09/2013 4
Why?
5. Classification of Operational Risks
High frequency/low impact events are managed to
improve business efficiency. These events tend to be
readily understood and are viewed as ‘the cost of doing
business’.
Examples?
06/09/2013 5
Examples?
6. Expected loss verses unexpected loss
Expected loss is the loss incurred as a bank conducts its
normal business.
Can be simply defined as the cost of doing business
The only way to totally prevent them is to cease doing
business.
06/09/2013 6
business.
7. Expected loss versus unexpected loss
A bank uses statistical methods to predict its expected
losses.
In short, the firm uses past data and experience to
predict the future.
A simple method of calculating expected loss is to
06/09/2013 7
A simple method of calculating expected loss is to
compute the mean (average) of the actual losses over a
given time and accept this as the likely future level.
8. Expected loss verses unexpected loss
A firm may also attempt to ‘predict’ its unexpected losses
using statistics, much like the way that is used to predict
expected losses.
The problems are the past data may not available and
therefore to calculate unexpected loss a firm uses:
06/09/2013 8
therefore to calculate unexpected loss a firm uses:
available internal data
external data from other firms
data from operational risk scenarios
9. Operational risk event categories
The simplest way of understanding operational risk in banks is to
categorize it as anything but credit risk or market risk.
However, this is a very broad definition and does not help manage
operational risk.
06/09/2013 9
Generally, operational risk events can be subdivided into:
internal process risk
people risk
systems risk
external risk
legal risk
10. Internal Process Risk
Internal process risk is defined as the risk associated
with the failure of a bank’s processes or procedures.
During a bank’s day-to-day operations, staff follow preset
working practices.
These procedures and policies will include all the
06/09/2013 10
These procedures and policies will include all the
checks, and controls required to ensure that customers
are correctly served and the bank remains within the
laws and regulations by which it is governed
11. Internal Process Risks
Internal process risk events include:
documentation – inadequate, insufficient or wrong
lack of controls
marketing errors
misselling
money laundering
06/09/2013 11
money laundering
incorrect or insufficient reporting (e.g. regulatory)
transaction error
Reviewing and improving a bank’s internal processes as part of
operational risk management can improve its efficiency. Errors often
occur when a process is complicated, disorganized or easily
circumvented, all of which are also inefficient business practices.
12. Risk Management Process Feedback Loop
1. Identify, assess and
prioritize risks
2. Develop
strategies to
measure risk
6. Revise
policies and
procedures
06/09/2013 12
3. Design policies and
procedures to mitigate risks
4. Implement
and assign
responsibility
5. Test
effectiveness
and evaluate
results
13. MEASUREMENT
• Estimation of annual
losses – cost of
operational failurePROCESSES
REPORTING
• Integrated MIS
reporting
• Awareness of
exposures
• Knowledge of
controls quality
There are four fundamental steps to managing operational risk, with
each step leading to improvements in management & control quality and
greater economic profit
FRAMEWORK
• Risk strategy,
tolerance
• Roles and
responsibilities
• Policies and
procedures
• Risk definition and
categorization
operational failure
• Estimation of VaR –
risk capital
• Estimation of scores
representing quality
of internal controls
PROCESSES
• Loss data collection
• Risk indicator data
collection
• Control self-
assessment
• Risk assessment and
analysis
• Workflow
• Automatic notification
• Follow up action
controls quality
• Cost benefit analysis
• Improved risk
mitigation and
transfer strategy
Management & Control Quality
EconomicProfit
14. The universe of operational risks spans causes, events and
consequences
Insufficient training
CAUSES EVENTS CONSEQUENCES
Lack of management
supervision
Inadequate
segregation of duties
External
Fraud
Internal
Fraud
Regulatory, Compliance
& Taxation Penalties
EFFECTS
Monetary
Loss or Damage
to Assets
Legal Liability
Inadequate
auditing procedures
Inadequate security
measures
Poor HR
policies
Poor systems
design
Employment Practices
& Workplace Safety
Clients, Products
& Business Practices
Damage to
Physical Assets
Business Disruption
& System Failures
Execution, Delivery &
Process Management
Restitution
Loss of Recourse
Reputation
Business Interruption
Monetary
Losses
OTHER
IMPACTS
Forgone
Income
•
•
•
Write-down
15. Using internal and external loss data can calculate Value at Risk
INDIVIDUAL
LOSS EVENTS
RISK MATRIX FOR
LOSS DATA
VAR
CALCULATION
TOTAL LOSS
DISTRIBUTION
74,712,345
74,603,709
LOSS
DISTRIBUTIONS
Frequency
of events74,603,709
74,457,745
74,345,957
74,344,576
167,245
142,456
123,345
113,342
94,458
•
•
•
of events
Severity
of loss
43210
40-
50
30-
40
20-
30
10-
20
0-10
INTERNAL
FRAUD
EXTERN AL
FRAUD
EMPLO YMEN T
PRACT ICES &
W ORKPLACE
SAFET Y
CLIENTS,
PRODUCTS &
BUSINESS
PRACT ICES
DAMAGE TO
PHYS IC AL
ASSETS
EXECUTION,
DELIVERY &
PROCESS
MAN AGEMENT
BUSINESS
DISRUPT ION AND
SYSTEM
FAILURES TOTAL
Corporate Finance Number 36 3 25 36 33 150 2 315
Mean 35,459 52,056 3,456 56,890 56,734 1,246 89,678 44,215
Standard Deviation 5,694 8,975 3,845 7,890 3,456 245 23,543 6,976
Trading & Sales Number 50 4 35 50 46 210 3 441
Mean 53,189 78,084 5,184 85,335 85,101 1,869 134,517 66,322
Standard Deviation 8,541 13,463 5,768 11,835 5,184 368 35,315 10,464
Retail Banking Number 45 4 32 45 42 189 3 397
Mean 47,870 70,276 4,666 76,802 76,591 1,682 121,065 59,690
Standard Deviation 7,687 12,116 5,191 10,652 4,666 331 31,783 9,417
Commercial Banking Number 41 3 28 41 37 170 2 357
Mean 43,083 63,248 4,199 69,121 68,932 1,514 108,959 53,721
Standard Deviation 6,918 10,905 4,672 9,586 4,199 298 28,605 8,476
Payment & Settlements Number 37 3 26 37 34 153 2 321
Mean 38,774 56,923 3,779 62,209 62,039 1,363 98,063 48,349
Standard Deviation 6,226 9,814 4,205 8,628 3,779 268 25,744 7,628
Agency Services Number 44 4 31 44 40 184 2 386
Mean 46,529 68,308 4,535 74,651 74,446 1,635 117,675 58,018
Standard Deviation 7,472 11,777 5,045 10,353 4,535 321 30,893 9,154
Asset Management Number 40 3 28 40 36 165 2 347
Mean 41,876 61,477 4,081 67,186 67,002 1,472 105,908 52,217
Standard Deviation 6,725 10,599 4,541 9,318 4,081 289 27,804 8,238
Retail Brokerage Number 48 4 33 48 44 198 3 417
Mean 50,252 73,773 4,898 80,623 80,402 1,766 127,090 62,660
Standard Deviation 8069 12719 5449 11182 4898 347 33365 9886
Insurance Number 43 4 30 43 39 179 2 375
Mean 45,226 66,395 4,408 72,561 72,362 1,589 114,381 56,394
Standard Deviation 7,262 11,447 4,904 10,063 4,408 312 30,028 8,897
Total Number 435 36 302 435 399 1,812 24 3,806
Mean 45,653 67,021 4,450 73,245 73,044 1,604 115,459 56,926
Standard Deviation 7,331 11,555 4,950 10,158 4,450 315 30,311 8,981
Annual Aggregate Loss ($)
Mean 99th Percentile
Simulation
VaR
Calculator
e.g.,
Monte
Carlo
Simulation
Engine
16. Composite control assessment/indicator scores can be used to modify
capital figures
VAR
CONTROL
ASSESSMENT/INDICATOR
SCORE
Adjustment for
Quality of
CAPITAL
0
Current score
Quality of
Current Control
Environment
190100210
Previous score 50
Linking capital to changes in the quality of internal controls provides an incentive for
desired behavioral change
19. The Basic Indicator Approach
Banks using the Basic Indicator Approach must hold
capital for operational risk equal to the average over the
previous three years of a fixed percentage (denoted
alpha) of positive annual gross income.
Figures for any year in which annual gross income is
06/09/2013 19
Figures for any year in which annual gross income is
negative or zero should be excluded from both the
numerator and denominator when calculating the
average.
21. The Standardized Approach
In the Standardized Approach, banks’ activities are divided into eight business lines:
corporate finance, trading & sales, retail banking, commercial banking, payment &
settlement, agency services, asset management, and retail brokerage.
Within each business line, gross income is a broad indicator that serves as a proxy
for the scale of business operations and thus the likely scale of operational risk
exposure within each of these business lines.
The capital charge for each business line is calculated by multiplying gross income by
a factor (denoted beta) assigned to that business line.
06/09/2013 21
a factor (denoted beta) assigned to that business line.
Beta serves as a proxy for the industry-wide relationship between the operational risk
loss experience for a given business line and the aggregate level of gross income for
that business line.
It should be noted that in the Standardized Approach gross income is measured for
each business line, not the whole institution, i.e. in corporate finance, the indicator is
the gross income generated in the corporate finance business line
25. Advanced Measurement Approaches (AMA)
Under the AMA, the regulatory capital requirement will
equal the risk measure generated by the bank’s internal
operational risk measurement system using the
quantitative and qualitative criteria.
Use of the AMA is subject to supervisory approval.
06/09/2013 25
Use of the AMA is subject to supervisory approval.
A bank adopting the AMA may, with the approval of its
host supervisors and the support of its home supervisor,
use an allocation mechanism for the purpose of
determining the regulatory capital requirement
26. Lakukanlah agregasi dengan @Risk dengan prosedur berikut
1. Data severity dan frequency dicari distribusinya untuk mendapatkan
parameter dalam simulasi Monte Carlo
2. Pertama kali yang disimulasi adalah parameter distribusi frequency,
buatlah 1.000 iterasi
3. Identifikasikan numbers of #event dengan fungsi Excel
COUNTIF(range,criteria). Ex. COUNTIF(a1:a1000;1)=220. Artinya
dalam 1000 simulasi, ada 220 kejadian dimana fraud terjadi sekali
Agregasi Operational VaR Dengan Simulasi MC
26
dalam 1000 simulasi, ada 220 kejadian dimana fraud terjadi sekali
4. Akumulasikan #event (tentunya terkecuali untuk 0 event), untuk
menentukan berapa iterasi yang diperlukan untuk simulasi kedua
yakni simulasi atas distribusi severity. Misalnya kita harus
memperoleh 2.370 data severity data untuk membangun (aggregate)
operational loss distribution
5. Lakukanlah agregasi (lihat slide berikut) dan sortirlah untuk
memperoleh the worst 1% (data ke 11 dari hasil sortiran), itulah nilai
VaR
6. VaR = unexpected loss, sedangkan Capital at Risk adalah VaR –
expected loss. Bagaimana cara menghitung Expected loss ?
27. How to prepare frequency distribution for aggregation…
Aggregation: Estimate the Operational VaR
Result of Monte Carlo Simulation for Frequency Distribution
0 926 0
1 2204 9074
2 2621 6870
3 2079 4249
4 1237 2170
5 589 933
6 233 344
27
6 233 344
7 79 111
8 24 32
9 6 8
10 1 2
11 1 1
12 0 0
13 0 0
14 0 0
15 0 0
10000 23794
#iteration for Monte Carlo
Simulation of Severity Distribution
29. Frequencyoflosses
Capital at Risk (Rp 422.475.000)
=
Unexpected losses – Expected Losses
Sustaining losses in Operational Risk
1%
29
Size of losses
Frequencyoflosses
Income Capital Insurance
1%
447.74025.265