The New Operational Risk Management

Duration:
2 days
Location:
Prague, NH Hotel Prague
  • Recent Regulatory Initiatives and Industry Response
  • The Standardised Measurement Approach
  • Business Indicator and BI Component
  • The Internal Loss Multiplier and Loss Component
  • Identification, Collection and Treatment of Loss Data
  • Managing Operational Risk in Light of the New Capital Rules
Driven by new regulation, banks should prepare for implementation of the Standardised Measurement Approach (SMA) for operational risk.


Course Description
The purpose of this seminar is to give you a good understanding of the new Basel document for Operational risk with particular focus on the challenges posed by the Standardised Measurement Approach (SMA).

We start with an overview of the recent regulatory initiatives and industry response. We present how to manage the regulatory change and explain a new way of quantifying operation risk including a potential SMA/AMA hybrid models.

We give a thorough introduction to the Standardised Measurement Approach for operational risk that primarily includes: business indicator, BI component, internal loss multiplier and loss component and the SMA capital requirement.

Further, we present and explain the minimum standards for the use of loss data under the SMA, which consist of general and specific criteria on loss data identification, collection and treatment.

Finally, we will present and discuss possible ways of managing operational in light of the new capital rules and regulatory environment.


Methodology
Classroom style lectures featuring up-to-date case studies and examples.

09.15 - 12.00

Recent Regulatory Initiatives and Industry Response

  • The New Consultative Document by the BIS
  • Non-model-based Method for Operational Risk Capital
    • Comparability of capital measures
    • Reducing complexity
  • Withdrawal of Internal Modelling for Regulatory Capital
    • Discarding of AMA as a source of operational risk
    • The Lower Standards in Risk Management
  • The Models Still Play an Important Role Despite the SMA

Managing the Regulatory Change

  • Preparing for Implementation of the New Regulation
  • Potential SMA/AMA hybrid model
  • New Way of Quantifying of Operation Risk Capital

12.00 - 13.00 Lunch

13.00 - 16.30 The Standardised Measurement Approach for Operational Risk

  • Business Indicator
    • Asymmetric impact on the "distribute only" and the "originate to distribute" business models
    • Inconsistency in the treatment of dividend income
    • Overcapitalisation of banks with a high net interest margin
    • Overcapitalisation of banks with high fee revenues and expenses
    • Inconsistent treatment of leasing compared with credit
  • BI Component
    • Five BI buckets and thresholds
    • Progressively increasing marginal coefficients
  • Internal Loss Experience
    • The addition of the Loss Component
    • The Internal Loss Multiplier
    • Possible alternative approaches
  • The SMA Capital Requirement

Day Two

09.00 - 09.15 Recap

09.15 - 12.00 Identification, Collection and Treatment of Loss Data

  • Importance of the quality and integrity of the data
  • Minimum loss data standards under Pillar 1
  • The general criteria for the use of the loss component in the SMA
    • The observation period
    • Mapping of historical internal loss data into categories
    • Appropriate procedures and processes
  • Specific criteria on loss data identification, collection and treatment
    • The SMA loss data set
    • Gross loss, net loss, and recovery definitions
    • Grouped losses

12.00 - 13.00 Lunch

13.00 - 16.30 Managing Operational Risk in Light of the New Capital Rules

  • Update of the sound practices for managing operational risk
  • Emphasis on more meaningful operational risk analytics
  • Tools that improve analyze of historical losses
  • Further development and use of operational risk scenario analysis
  • How to predict future events more effectively?
  • The issue of data quality and governance (the BCBS 239)
  • Simplification of reporting and results

Evaluation and Termination of the Seminar

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