Operations Risk: Managing a Key Component of Operational Risk

Operations Risk focuses on areas such as technology risk, people risk, and settlement risk, examining the dangers that lurk within different organisations. Case studies throughout the book illustrate the way in which risk can become magnified and ultimately become a serious danger to the businesses concerned. The reader is challenged throughout the book to interpret given situations in Operations Risk so as to understand the impact of the risks and devise solutions through a series of exercises included in the relevant chapters.

Introduction:

Risk is an important subject in financial markets and of course our everyday lives, and yet it is sometimes easy to recognise risk and yet also sometimes very difficult. In all the many initiatives, regulations and recommendations associated with financial markets we still primarily have three types of risk: market, credit and operational.

We have Basle II, Sarbannes–Oxley, various EU Directives and MiFID all of which relate to risk in various ways and yet in terms of operational risk it is the very fundamental processing, people and procedures that generate the risk scenarios and events. All the directives in the world will prevent credit-card fraud or Internet banking risks. Neither will they totally stop other frauds, money laundering or embarrassing “cock ups” that cause huge reputation and sometime financial loss.

Operations risk is often “lost” in the generic term ‘operational risk’, depending on the definition of “operational risk”. Operations is very much about management, people, projects, systems, processes and procedures and client service and so it is therefore reasonable to consider it to be at the very least a very significant part of operational risk.

For this very reason operations staff and managers are at the heart of most of the operational risk management process, although often they do not realise it. This is simply because by doing their jobs well they typically “manage” somewhere in the region 80% of the firms’ operational risk. Risk managers must manage the remainder and do so in conjunction with the operations managers and teams be they in securities settlement, premises or technology.

In this book we look at the issues affecting the operations teams particularly in banking and investment businesses and give an insight into what the nature of operations and operational risk really is. Whether you work in operations teams, audit or of course risk management, understanding operations risk is vitally important. In this book, I hope I have given a really good insight that will interest the reader and maybe help prevent them being part of the next huge “operational risk” event!

Contents:

• THE OPERATIONAL RISK UNIVERSE
• DEFINING OPERATIONS RISK IN INVESTMENT AND RETAIL BANKING
• OPERATIONS RISK
• MANAGING THE RISK
• UNDERSTANDING A RISK EVENT
• WORKFLOW AND OPERATIONS RISK
• RISK AND REGULATION
• INNOVATIVE TOOLS TO MANAGE PEOPLE RISKS
• INSOURCING AND OUTSOURCING RISK

Operations Risk: Managing a Key Component of Operational Risk By David Loader pdf