RM - MIDTERM

• Operational risk management


  process involving risk analysis, strategy and risk control to identify and reduce risks that may occur in daily business operations.
• Operational Risk Management


  The objective of this form of management is to control and minimize operational risks which are losses due to failures in processes, systems or by employees in the business
• Using operational risk management as a tool helps increase revenue, productivity and the overall success of an organization
• Types of Operational Risk

  Internal Fraud

  External Fraud

  Employment Practices and Workplace Safety

  Clients, Projects, and Business Practices

  Damage to Physical Assets

  Business Interruption and Systems Failures

  Execution, Delivery and Process Management
• Internal Fraud


  This includes crimes such as asset misappropriation, tax evasion, and bribery committed by individuals within the institution.
• External Fraud


  Risks such as theft, hacking, and forgery committed by external actors aiming to harm the institution
• Employment Practices and Workplace Safety


  Risks related to the institution's human resources policies, practices, and the physical safety of the workplace
• Clients, Projects, and Business Practices


  Risks arising from the institution's dealings with clients and the conduct of its business practices.
• Damage to Physical Assets


  This includes risks to the institution's physical assets from various causes, such as natural disasters
• Business Interruption and Systems Failures


  Risks related to interruptions to business operations or failures in the institution's systems and technology infrastructure
• Execution, Delivery, and Process Management


  Risks associated with the failure to properly execute operations, deliver services, or manage business processes.
• Common Grounds in ORM

  Risk Identification and Assessment

  Regulatory Compliance

  Mitigation Strategies
• The board is responsible for establishing the operational risk strategy
• Senior management is responsible for implementing the operational risk strategy.
• Systems should be implemented to monitor operational risk exposures and loss events
• Supervisors should conduct regular independent evaluations of these principles.
• Sufficient public disclosure should be made to allow stakeholders to assess the operational risk exposure and the quality of operational risk management.
• Operational Risk Framework

  Risk Strategy and Risk Appetite

  Risk Governance

  Risk Culture

  Operational Risk Assessment and Measurement

  Operational Risk Management and Monitoring

  Operational Risk Reporting and Insights

  Operational Data and Technology
• Risk Strategy and Risk Appetite


  This is about setting out what types of risk the organization is willing to take on and how much of it they can handle. Think of it as setting boundaries for risk-taking.
• Risk Governance


  This involves the structures and policies in place to manage risk. It's about who makes decisions about risks and how those decisions are made and enforced
• Risk Culture


  This refers to the attitudes, beliefs, and understanding about risk within the organization. It's the environment that influences how staff at all levels behave with respect to risk
• Operational Risk Assessment and Measurement


  Here, risks are identified, sized up, and prioritized. This is where the organization figures out what could go wrong.
• Operational Risk Management and Monitoring


  This is the ongoing process of handling the risks, including putting measures in place to control or mitigate them
• Operational Risk Reporting and Insights


  Information about risks and how they're being managed is reported up the chain
• Operational Data and Technology


  This involves the systems and data used to manage and report on risks
• Risk and Control Self-Assessment


  operational risk tool to document key business processes, identify key risks and controls and measure the level of inherent and residual risk within key process
• Operational Metrics


  key risk indicators to monitor the current risk level in the business. metrics and tolerance monitor level of risk.
• Operational Losses


  quantifies operational loss events that have occurred and required root cause analysis
• Root Cause Analysis


  analysis of large operational losses and identify the root cause to enhance process
• Scenario Analysis


  development of hypothetical scenarios or analysis of them to measure the likelihood and severity of this event. This type of exercise also identifies downstream impacts
• New Initiative Risk Assessment


  identifies significant changes to the organization and analyze potential operational risk
• Difficulties in Measuring Operational Risk

  Complexity of Risk

  Lack of historical data

  Subjectivity and Expert judgement

  changes in the external environment

  quantification of intangible risk
• Project Management Risk refers to the potential of encountering unforeseen events or conditions during the management of a project that can cause it to deviate from its planned objectives, timeline, or budget
• Project risk management is a systematic process to identify, analyze, and manage risks in a project to ensure it meets its goals within the agreed parameters of cost, time, and quality
• Importance of RM in a Project

  Preventing Cost Overruns

  Ensuring Timely Delivery

  Maintaining Quality Standards

  Enhancing Decision Making

  Improving Resource Efficiency

  Building Stakeholders Confidence

  Adapting to Changes

  Learning and Development
• Key Objectives Project of Risk Management

  Risk Identification

  Risk Assessment

  Risk Mitigation Planning

  Resource Allocation

  Risk Monitoring and Control

  Communication

  Enhancing Decision Making

  Improving Project Outcomes
• Risk Identification


  This involves recognizing all possible risks that could impact project objectives in terms of scope, time, cost, and quality
• Risk Assessment


  to evaluate the identified risks to determine their likelihood and potential impact on the project. This helps in understanding how significant each risk is and prioritizing them accordingly
• Risk Mitigation Planning


  to develop strategies and plans to reduce the probability of risks occurring or minimize their impact if they do occur. This involves choosing among options such as avoiding, transferring, mitigating, or accepting risks.
• Resource Allocation


  To ensure that resources (time, budget, personnel) are allocated efficiently to manage risks. This includes provisioning for contingency reserves and allocating the necessary tools and techniques