Operational Risk Management

This quantitative study examines the importance and practices of operational risk management in Ghanaian banks. The objective of this paper is to investigate the practitioner's understanding of the difference (if any) between importance and practices of operational risk management programs in Ghanaian banks using a survey research design. The survey instrument, used in collecting data from 170 respondents, was duly validated. The results confirmed that there exists a high level of ORM awareness among the respondents. The banks deploy different risk management solutions to control and mitigate operational risk. The study also concluded that there was a clear difference between perceive ORM importance and ORM practices. This meant that there exists a gap between ORM awareness and ORM program practices. The lack of effective implementation of ORM programs are likely to cause an operational risk contagion among banks with very catastrophic impact on the whole financial sector. The study therefore, recommends that bank mangers commensurate ORM awareness creation with practical implementation of ORM programs and policies in their banks to mitigate operational risk hazards.

Risk management is an important factor to run a bank business because of business growth and the increasing complexity of bank activities which of course is accompanied by the risk level faced by the bank. POJK no 18/POJK.03/2016 concerning about Application of Risk Management for Commercial Banks states "Banks must implement an internal control system effectively for the implementation of operational activities at all levels of the Bank's organization". In particular, the Basel II Capital Accord defines operational risk as the risk of losses arising from the failure or inadequate internal processes, human resources, systems, and external events that affect the bank's operations. In carrying out its business, banks offer financial services to the Bank will receive and manage various types of risks to be controlled effectively so they can avoid large losses. The Financial Services Authority Regulation (POJK) describes the definition of risk management as a series of methodologies and procedures used to identify, measure, monitor and control risks arising from all bank
business activities. One important issue in the context of operational risk management is the need for assessment data carried out by the risk owner in managing daily banking operational risk, to facilitate data management related to risk mitigation so that similar events do not recur in the future. To achieve this, it is necessary to develop a system that manages assessment data sourced from the risk owner using tools called Risk Control Self Assessment. The Rapid Application Development (RAD) model is used to refer to adaptive software development approaches. RAD is very suitable to be used to develop software that is driven by the requirements of Graphical User Interface and a short time period.

This paper gives a summary of all the key elements that make up Enterprise Risk Management and its integration in key organizational business activities.
Enterprise risk management (ERM) is the process of planning, organizing, leading, and controlling the activities of an organization to minimize the effects of risk on an organization's capital and earnings, reputation and shareholder value. The benefit of ERM is that it aligns organization, people, processes and infrastructure, provides a benchmark for risk/reward, aids risk visibility to operational activities and for the more mature benefit, a competitive advantage. When ERM is sound business management if it becomes an integral part of the organization’s DNA.

لم تعُد المخاطر قيداّ على الأعمال بل أصبحت مصدراً هاماً من مصادر الميزة التنافسية، حيث باتت المخاطر جزءاً هاماً من بيئة الأعمال بصورة عامة، فبدون مخاطر لا يوجد أرباح، وبالمقابل إن تجاهل المخاطر يمكن أن يهدد أكبر المؤسسات بالفشل والإفلاس، وينعكس هذا التهديد على سمعة المؤسسة واستقرارها المالي واستمرارية وجودها.
هذا وإن موضوع المخاطر وإدارتها من الموضوعات التي شغلت فكر الكثير من الباحثين الأكاديميين والتطبيقيين على حدٍ سواء، نظراً لما لها من أثر جوهري في سلامة واستقرار المنشآت التجارية والمؤسسات المالية، وقد زادت أهمية إدارة المخاطر بعد اندلاع الأزمات المالية المتتالية التي عصفت بالنظام المالي والمصرفي العالمي، ما استوجب ظهور صناعة مالية مبتكرة تحمي المنشآت من المخاطر المختلفة عُرفت بصناعة إدارة المخاطر لها منتجوها وأدواتها وأسواقها.
ومن هنا يأتي هذا الكتاب ليقدم للقارئ أهم موضوعات المخاطر المالية والمصرفية وإدارتها الحديثة وتطبيقها على أرض الواقع، حيث تضمن الفصل الأول لمحة سريعة عن مفهوم إدارة المخاطر ومسبباتها وأنواعها وأساليب إدارتها.
أما الفصل الثاني فقد خُصِصَ للحديث عن المخاطر المالية (خطر الائتمان، خطر سعر الفائدة، خطر سعر الصرف) من حيث التعريف بهذه المخاطر وقياس الخسارة الناتجة عنها باستخدام النماذج الرياضية والاحصائية، واقتراح أساليب وتقنيات داخلية لإدارة هذه المخاطر بشكل ذاتي، مع سرد أمثلة وحالات تطبيقية توضح كيفية استخدام هذه الأساليب والتقنيات.
في حين تضمن الفصل الثالث شرح وتطبيق أدوات الهندسة المالية المصممة لإدارة المخاطر (المشتقات المالية)، المؤلفة من عقود الخيارات والعقود الآجلة والعقود المستقبلية وعقود المبادلات. حيث تم شرح هذه العقود بطريقة مبسطة وتوضيح آلية تطبيقها على أرض الواقع، مع اقتراح استراتيجيات محددة لاستخدام هذه الأدوات بشكل سليم.
أما الفصل الرابع فقد خُصص للحديث عن للمخاطر المصرفية المؤلفة من خطر المحفظة الائتمانية، خطر محفظة السوق، خطر السيولة المصرفية، خطر التشغيل، حيث انطلق الكاتب من شرح القوائم المالية الموحدة للمصارف وتوضيح أهم البنود الرئيسية فيها، ثم ناقش المخاطر المصرفية وأساليب إدارتها بطريقة عملية تضمنت حالات تطبيقية متعددة.
وقد خٌصص الفصل الخامس للحديث عن لجنة بازل للرقابة المصرفية، التي تعد اللاعب الرئيسي في مجال وضع القواعد الاحترازية التي تساعد على تحقيق سلامة النظام المصرفي على المستويين المحلي والعالمي. حيث تم التوسع في شرح الأساليب المقترحة من قبل اللجنة لإدارة المخاطر المصرفية وطرح الحالات العملية والتطبيقية التي توضح كيفية استخدام هذه الأساليب.

BACKGROUND: Fishbone diagrams have been widely promoted as a systems-focused hazard analysis tool for use in root cause analysis, but they suffer from a number of structural weaknesses, including a unidirectional structure that only takes into account forces that promote an accident (ignoring those that make the accident less likely or less severe) and a means of displaying these forces that does not convey any difference in strength of influence. In a separate but related issue, many healthcare organizations suffer from a lack of change management expertise.

PROPOSED SOLUTION: To address these concerns, I present a novel technique, the Lovebug diagram, which draws from both Fishbone diagrams and force-field analysis (an approach to analyzing planned change). This new technique adds value to both its progenitor methods, while retaining their key strengths and ease of use. It can be used both prospectively, to assess planned changes, and retrospectively to assess unplanned (accidental) departures from the status quo.

DISCUSSION: The Lovebug diagram is a more powerful analytical tool than its progenitor methods; however, overall adoption of systems-focused tools for root cause analysis remains suboptimal. Additional research is needed to determine how best to promote a truly systems-focused approach to healthcare root cause analysis. Beyond this retrospective use of the technique, it represents a simple tool to assist healthcare organizations with prospective change management.

Available from: http://cri.sagepub.com/content/early/2013/10/25/1356262213510855.abstract

MIHOK, Dušan: Finančné rozhodovanie v podmienkach obmedzenej racionality. – Ekonomická univerzita v Bratislave. Fakulta podnikového manažmentu; katedra podnikových financií. – Vedúci záverečnej práce: prof. Ing. Peter Markovič, PhD.
– Bratislava: FPM EU, 2015, 71 s.
Ľudské rozhodovanie ohľadom financií je značne subjektívne a ovplyvnené našou jedinečnou psychológiou. Existuje veľké množstvo definovaných odchýlok, ktoré skresľujú navonok racionálny úsudok. Tieto odchýlky ovplyvňujú všetkých bežných ľudí, no od profesionálnych investorov prirodzene očakávame rozumnejšie, objektívnejšie a najmä racionálnejšie rozhodnutia. Rozhodli sme sa preto v tejto diplomovej práci preskúmať prejavy odchýlok v správaní a rozhodovaní vybraného profesionálneho investora. Práca je rozdelená do 5 kapitol, obsahuje 2 tabuľky, 2 obrázky  a 9 grafov. Prvá kapitola sa venuje východiskám behaviorálnej ekonómie a popisu odchýlok, najmä kognitívnej disonancie, ďalšie dve cieľom a použitej metodike. Posledné dve kapitoly predstavujú samotnú analýzu vybraného skutočného prípadu a výsledky, ku ktorým
sme dospeli. Analýzou priebehu dlhoročného pôsobenia navonok úspešného investora, ktoré skončilo finančným škandálom ohromných rozmerov sme boli schopní identifikovať prítomnosť mnohých odchýlok od racionality v jeho konaní. Potvrdili sme tým náchylnosť profesionálnych investorov k rovnakému skresleniu úsudku ako je to u ostatných ľudí. Ale pretože títo rozhodujú o neporovnateľne väčších čiastkach peňazí oproti zvyšku populácie, aj menšie prejavy odchýlok môžu spôsobovať veľké finančné straty a problémy. V diskusii sme načrtli súvislosť s poslednou finančnou krízou a určili sme prvotného vinníka týchto udalostí – extrémny oportunizmus. Z nášho výskumu vyplýva, že pokiaľ spoločenský tlak nevytvorí podmienky pre presun ťažiska z honby za ziskom
na udržateľnosť, zároveň zlepšenie kontroly a zmeny odmeňovacích systémov, budeme v budúcnosti svedkami opätovných a čoraz väčších finančných kolapsov a zlyhaní.
     
Kľúčové slová:
finančné rozhodovanie, behaviorálna ekonómia, obmedzená racionalita, kognitívna disonancia, neautorizované obchodovanie

This paper focuses on investigating the effect of green manufacturing on operational performance of manufacturing firms. The study adopted crosssectional survey design and data was collected across all the 61 manufacturing firms listed by KAM in 2019 through questionnaires. The study used Regression Model technique to analyze the quantitative data and validate the developed research model. Green manufacturing was found to have a positive effect on operational performance. Green product design and development, GSCM, and efficient processes had significant effect in enhancing operational performance while end-of-life product management was found to have insignificant relationship with operational performance.

In this article we call for a new approach to patient safety improvement, one based on the emerging field of evidence-based healthcare risk management (EBHRM). We explore EBHRM in the broader context of the evidence-based healthcare movement, assess the benefits and challenges that might arise in adopting an evidence-based approach, and make recommendations for meeting those challenges and realizing the benefits of a more scientific approach.

This study examines the effect of automation on operational risk (OpRisk) measurement in a South African bank. It uses historical process risk loss data from the first quarter (2013Q1) derived from the automated trade amendment tracker (ATAT) database  - a computerised
tool designed to automate the collection of internally generated OpRisk events at the bank in question. The results indicate that a Value-at-Risk (VaR) estimate for OpRisk largely depends on the accuracy of the loss data. Capital adequacy is determined using this estimate of VaR, suggesting that the ATAT device used in operational risk measurement
improves on investment services activity in South Africa. Finally, it appears that risk management practices in the South African banking industry are more concerned about traditional operational risk management (ORM) rather than the determination of OpRisk VaR as it becomes a matter of great concern for financial institutions (FI's) across the globe.

This paper focuses on investigating the effect of green manufacturing on operational performance of manufacturing firms. The study adopted crosssectional survey design and data was collected across all the 61 manufacturing firms listed by KAM in 2019 through questionnaires. The study used Regression Model technique to analyze the quantitative data and validate the developed research model. Green manufacturing was found to have a positive effect on operational performance. Green product design and development, GSCM, and efficient processes had significant effect in enhancing operational performance while end-of-life product management was found to have insignificant relationship with operational performance.

The insurance industry is facing a time of great turbulence as macro-economic forces push insurers to reconsider their business models, while at the same time regulatory pressures with respect to operational risk management requirements are coming heavily to bear. The goal of this study was to identify actionable insights that may serve to progress operational risk management in Canadian insurers so that it can operate as both an oversight function as well as a value driver, a necessary enhancement to current operating models that are limited to protectionist approaches and may be barriers to innovation. Canada’s Big 3 insurers are the primary focus for the study. A mixed method research approach based on a constructionist research design was used to ensure research validity. Senior leaders representing large banks and insurers in Canada were interviewed to understand key challenges to setting up or maturing operational risk management functions, conditions for success, and strategic vision for the function. Two quantitative surveys were executed, targeting operational risk management professionals and business operations leaders, respectively. The surveys focused on understanding success factors and where operational risk management needs to improve. Comparative analysis was completed via a review and assessment of industry literature to establish the current state of operational risk management in the financial industry, recognizing that Canadian insurers can learn much about how operational risk management was designed and implemented in Canadian banks. To situate the regulatory environment, Canada’s Office of the Superintendent of Financial Institutions (OSFI) and Basel Committee on Banking Supervision were selected as key representative regulators of these institutions. The study found five major challenges with respect to operational risk management in the financial industry, including ineffective development and launch of operational risk management programs; suboptimal operational risk management processes; misalignment in operational risk management educational programs to skills needed; weak understanding of business needs; and weak value orientation. Ultimately, the study finds that Canadian insurers are faced with significant macro-economic impacts along with increasing regulatory pressure; organizational transformation will be a key focus of insurers over the next several years. A combined approach that closes the identified weaknesses which are apparent in the broader financial industry and then evolves the operational risk management mindset to operate in the upside of risk may help Canadian insurers to not just survive the turbulent business landscape but also thrive.

Today, business in our world is experiencing systemic failures that affect the performance of the company. Mostly, through the use of financial measurements, corporate success is viewed at their level of effectiveness. This study explored the mediating effect of the management control system and operational risk management on the impact of human capital on organizational performance. This was a quantitative research with a correlational research design. The study employed self-constructed research instruments with Cronbach Alpha of human capital 0.893, Organizational performance 0.855, and operational risk management 0.833 and management control system 0.894. The respondents were made up of 439 (10%) of the Institute of Chartered Accountant Ghana members who were conveniently sampled and answered an online distributed questionnaire. The results of the study revealed that management control system and operational risk management partially mediate the relationship between human capital and organizational performance. The research recommends that the intervention role of the management control system and operational risk management has shown to impact positively on organizational performance and human capital. Therefore, the implementation of a management control system and operational risk management must be paramount to the achievement of organizational performance from the viewpoint of chartered accountants in Ghana.

Operational risks have become more prominent than ever before, but recent events such as hacker attacks on the French and Dutch banking systems, or disruptions in the aftermath of natural disasters such as Sandy have highlighted the need for better IT risk management. Typically only few historical data on such events is available within organizations if at all. Therefore, new approaches need to be developed for Operational Risk Management (ORM) that are rooted in the organization and based on work flows and aims. To ensure compliance with and use of the risk management approaches, an integration of ORM in day-to-day operative business processes is essential. Therefore, this paper focuses on a model assessing the impact of operational risks on business processes and activities. It develops a Petri-net model to derive valid data to describe the severity of an identified operational risk although there is no of absent comprehensive statistical data-base. To relate the work to the organ...

Operational risk is a prominent preoccupation of all managers these days. Indeed, the development
of collective awareness has led executives to implement a wide variety of solutions in order
to keep this risk and its consequences under control. In this context, we propose a practical implementation
methodology of key risk indicators system with the aim to identify operational risks
and above all to propose preventive and corrective measures capable of monitoring and managing
operational risks. The proposed system will be adjusted to Investment Management process in a
Moroccan Asset Management Company.

This paper focuses on investigating the effect of green manufacturing on operational performance of manufacturing firms. The study adopted crosssectional survey design and data was collected across all the 61 manufacturing firms listed by KAM in 2019 through questionnaires. The study used Regression Model technique to analyze the quantitative data and validate the developed research model. Green manufacturing was found to have a positive effect on operational performance. Green product design and development, GSCM, and efficient processes had significant effect in enhancing operational performance while end-of-life product management was found to have insignificant relationship with operational performance.

This paper focuses on investigating the effect of green manufacturing on operational performance of manufacturing firms. The study adopted crosssectional survey design and data was collected across all the 61 manufacturing firms listed by KAM in 2019 through questionnaires. The study used Regression Model technique to analyze the quantitative data and validate the developed research model. Green manufacturing was found to have a positive effect on operational performance. Green product design and development, GSCM, and efficient processes had significant effect in enhancing operational performance while end-of-life product management was found to have insignificant relationship with operational performance.

This paper focuses on investigating the effect of green manufacturing on operational performance of manufacturing firms. The study adopted crosssectional survey design and data was collected across all the 61 manufacturing firms listed by KAM in 2019 through questionnaires. The study used Regression Model technique to analyze the quantitative data and validate the developed research model. Green manufacturing was found to have a positive effect on operational performance. Green product design and development, GSCM, and efficient processes had significant effect in enhancing operational performance while end-of-life product management was found to have insignificant relationship with operational performance.

This paper focuses on investigating the effect of green manufacturing on operational performance of manufacturing firms. The study adopted crosssectional survey design and data was collected across all the 61 manufacturing firms listed by KAM in 2019 through questionnaires. The study used Regression Model technique to analyze the quantitative data and validate the developed research model. Green manufacturing was found to have a positive effect on operational performance. Green product design and development, GSCM, and efficient processes had significant effect in enhancing operational performance while end-of-life product management was found to have insignificant relationship with operational performance.

The Basel Capital Agreement (Basel II) required all banking entities actively to manage Operational Risk by means of making explicit measurements and creating specific items in their general ledgers. Currently, the most sophisticated resource for handling transactional ...

Operational risk is a prominent preoccupation of all managers these days. Indeed, the development of collective awareness has led executives to implement a wide variety of solutions in order to keep this risk and its consequences under control. In this context, we propose a practical implementation methodology of key risk indicators system with the aim to identify operational risks and above all to propose preventive and corrective measures capable of monitoring and managing operational risks. The proposed system will be adjusted to Investment Management process in a Moroccan Asset Management Company.

This article focuses on the EU implementation of final Basel III by explaining the background, legislative texts, expected impact on EU banks, proposed timeline, and EU-specific adjustments in relation to the internationally agreed text. A general overview is also given with respect to the other elements included in this EU regulatory package, such as ESG risks and third-country branches. Finally, there is an indication regarding the anticipated timeline and next steps.
Final Basel III impact on MCR across the world and in the EU

- The impact should be limited for American and Asian banks, but for the largest European banks, tier 1 minimum required capital (MRC) would increase significantly. The initial estimates showed an increase in MRC by approximately 25%, with a total capital shortfall of €135.1 billion for EU banks. Although, over the next few years, the expected impact has decreased but still remains significant for large European banks.

- The Commission’s preferred option is to retain existing EU specifics, introduce additional deviations, and delay implementation (option 2). This is expected to lead to an increase in EU banks' capital requirements of less than 9% – between 6.4% and 8.4% – on average at the end of the transitional period in 2030, compared to 18.5% without the EU specifics and adjustments were not applied (option 1). The Commission estimates a €27 billion capital shortfall for the largest banks in order to meet the MRC.

... Page 3. OPERATIONAL RISKS, QUALITY, ACCIDENTS AND INCIDENTS 255 ... Based on these premises, consider Nassim Taleb's metaphor: 'A Turkey fed for 1000 days, every day, confirms that the human race cares about its welfare with increased statistical significance. ...

This quantitative study examines the importance and practices of operational risk management in Ghanaian banks. The objective of this paper is to investigate the practitioner’s understanding of the difference (if any) between importance and practices of operational risk management programs in Ghanaian banks using a survey research design. The survey instrument, used in collecting data from 170 respondents, was duly validated. The results confirmed that there exists a high level of ORM awareness among the respondents. The banks deploy different risk management solutions to control and mitigate operational risk. The study also concluded that there was a clear difference between perceive ORM importance and ORM practices. This meant that there exists a gap between ORM awareness and ORM program practices. The lack of effective implementation of ORM programs are likely to cause an operational risk contagion among banks with very catastrophic impact on the whole financial sector. The study...

After investing significant amounts of time and money in conducting formal risk assessments, such as root cause analysis (RCA) or failure mode and effects analysis (FMEA), healthcare workers are left to their own devices in generating high-quality risk control options. They often experience difficulty in doing so, and tend toward an overreliance on administrative controls (the weakest category in the hierarchy of risk controls). This has important implications for patient safety and the cost effectiveness of risk management operations. This paper describes a before and after pilot study of the Generating Options for Active Risk Control (GO-ARC) technique, a novel tool to improve the quality of the risk control options generation process. The quantity, quality (using the three-tiered hierarchy of risk controls), variety, and novelty of risk controls generated. Use of the GO-ARC technique was associated with improvement on all measures. While this pilot study has some notable limitations, it appears that the GO-ARC technique improved the risk control options generation process. Further research is needed to confirm this finding. It is also important to note that improved risk control options are a necessary, but not sufficient, step toward the implementation of more robust risk controls.

In this article we call for a new approach to patient safety improvement, one based on the emerging field of evidence-based healthcare risk management (EBHRM). We explore EBHRM in the broader context of the evidence-based healthcare movement, assess the benefits and challenges that might arise in adopting an evidence-based approach, and make recommendations for meeting those challenges and realizing the benefits of a more scientific approach.