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Operational Risk Management
Operational risk is defined as the risk of loss resulting from inadequate internal processes, misbehaviour of people, failed systems or from external events. Current incidents have shown that unlikely events happen and cause serious damage to organisations across sectors.
Within the banking industry, the rules of Basel II require that operational risks be systematically measured according to three different approaches with increasing requirements on data collection, modelling and risk measurement. A more advanced approach (like AMA) will not only grant a capital relief but also help to better manage these risks and, thus, reduce the impact of defaults.
How BearingPoint brings value
BearingPoint has developed an operational risk management framework that enables the systematic identification, measurement and control of operational risk. The different methods are integrated in this framework. The use of operational risk management methods represent a self-contained and self-repeating process with the following phases:
Risk identification: Investigation and description of potential loss events resulting from products, processes, systems, activities and loss causes (risk assessment).
Risk analysis: Categorisation of risks (events and causes), assignment of risk owners, identification of key risk indicators (KRI) to enable risk monitoring, design of a loss database.
Risk evaluation: qualitative assessment of risks, evaluation of potential loss severities and frequencies by experts, quantification of risks and scenario analysis.
Risk management: Identification and appraising of existing measures to handle risks and identification of further actions.
Risk action plan: Planning, decision and implementation of risk actions considering costs and benefits.
Risk monitoring: Installation of a management information system (including an indicator based early warning system) and risk reporting to senior management, monitoring of risk measures.
Review of OpRisk Management Circle: Audit of adherence and efficiency of actions.
BearingPoint supports clients setting up an operational risk management framework, developing or enhancing the operational risk management methods and integrating them into their processes.
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