Operational Risk Management

Operational risk is a risk arising from execution of a company's business functions. As such, it is a very broad concept including e.g. fraud risks, legal risks, physical or environmental risks, etc. The term operational risk is most commonly found in risk management programs of financial institutions that must organize their risk management program according to Basel II. In Basel II, risk management is divided into credit, market and operational risk management.

In many cases, credit and market risks are handled through a company's financial department; whereas operational risk management is perhaps coordinated centrally but most commonly implemented in different operational units Specifically, Basel II defines operational Risk as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. Although the risks apply to any organization in business, this way of framing risk management is particularly relevant to banking regimes where regulators are responsible for establishing safeguards to protect against systemic failure of the banking system and the economy.

Global Assessment

This module supports central definition and maintenance of questionnaires/forms to identify and assess risks, performance and controls of any type, both qualitatively and quantitatively. It can equally well be used for any type of question-based survey on topics such as business continuity, governance, audit, SOx, IT/Project, Compliance, Legal, etc.

The assessment process is based on and draws from the same core organization, process, risk, controls structures (hierarchies) defined in Global data Administration and this enables direct comparison of results with risk monitoring and the data loss per area. Results can also be seamlessly integrated into the quantification process.


Data Collection

This module delivers all required functionality for enterprise-wide collection and management of losses, incidents, deficiencies etc., including non-monetary losses and “near misses”. Events (causes) and effects (impacts) can be assigned to any or multiple organizational unit(s). An intuitive workflow feature supports the structured and clean collection and analysis of this data, this valuable information can also be linked to internal management accounting.


Indicators

Enterprise-wide surveillance and early-warning capability is provided for in this module. It features flexible aggregation of all identified key risk, control and performance indicators and a dynamic reporting structure. Reporting functionality provides for drill-down from a broad view of the firm-wide risk down to the single business units, processes and indicators to investigate the causes of risk. On request, clients will be provided a set of predefined indicators.


Action Management

Action Plan libraries serve to organize the activities, with automatic recommendations whenever pre-set thresholds for performance, control and audit (e.g. 'overdue' items) have been exceeded. Action Plans assigned to a particular department consists of one or n tasks. Each task can be assigned to individual users. Monitoring current performance is completely supported via individual and global reporting, as well as alerts based on any criteria. The entire process is workflow controlled by way of defaults provided or adjusted to individual requirements by configuration. Using powerful search features any required criteria can be specified by parameter setting to monitor status and performance of action plans. Integrated reporting supports full analysis and reports can be shared with other users for their own reporting and dashboards.


Reporting & Dashboards

Operational Risk solution provide a reporting solution that is internal to the system, requires no interfaces, in which reports once defined, are automatically adjusted when changes are made to structures, to computed results, to user permissions etc, so users can capture and save personal and public reports intuitively via a selection of fields, filters and search criteria, all dynamically updated whenever changes are made. The reporting capabilities are tightly integrated with the Administration Module, ensuring that visibility and control of all data respects any pre-defined roles and rights. Such depth of functionality is decisive, as it removes the need for complex and costly integration to or with external reporting packages.

Operational Risk reporting provide a full support given for drill-down from broad views of risk down to single business units, processes and/or indicators in order to rapidly investigate the sources of risk, and trigger immediate remedial action, all result data can be exported with ease to standard Word, Excel, PDF formats.

Modeling & Metrics

Losses, incidents and events of any type cases are the basis for the calculation of the loss distribution of a bank or insurance firm. This module supports the Basel Committee Advanced Measurement Approach and other ERM level measures of risk. Functionality provides for estimation of adequate distribution functions and risk measures for the regulatory combinations of business lines and event types or for areas set up internally. Results from the supervision of Key Risk, Control, Performance Indicators and/or the Assessments can also be used as conditioning information.