How does Operational Risk Management fit into an organization's Strategic Planning? This presentation attempts to provide a functional and implementable response.

1. Eneni Oduwole
Group Head, Operational Risk Mgt.
Dangote Group of Industries Limited

2. Outline
 Introduction
 Strategic Planning
 Operational Risk Management
 Case Study
 OpRisk Drivers
 OpRisk Communication Improvement
 Strategy & Risk Interplay
 Prioritizing Risks
 RM & Value Creation
 RM & Strategic Planning
 Failure to Incorporate RM

3. Introduction
www.andertoons.com

4. Overview – Strategic Planning
 Strategic planning requires clarifying the overall purpose
and desired results of an organization, and how those results
will be achieved
 It is a disciplined effort to produce fundamental decisions
and actions that shape and guide what an organization is,
what it does, and why it does it, with a focus on the future

5. Elements Of Strategic Planning
 Strategy Task Force
 Vision and Mission Statements
 Values
 Goals and Objectives
 Tasks Required
 Implementation Strategy
 Monitoring of the Strategic Plan

6.  Operational risk, broadly speaking, is the risk of loss resulting from
any malfunction in an organization
 Such events include direct and indirect actions that may lead to
increased errors, system failures, acts of nature, non-adherence with
internal policies land regulatory stipulations
 Operational Risk is the responsibility of all staff in an organization
– junior, middle and senior staff
 Involves interfacing with all business units with all business areas
in the organization
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Overview – Operational Risk Management

7. What Is Operational Risk?
 ‘the risk of loss resulting from inadequate or failed
internal processes, people and systems or from external
events’…Basel Definition
 ‘the risk of loss resulting from inadequate or failed
internal processes, systems or human factors, or from
external events. It includes the reputation and franchise
risk associated with business practices or market conduct
in which the Company is involved’…Citigroup Definition
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8. Classification Of OpRisk
 Operational risk can be classified as follows:
─The nature of the loss: internally inflicted or externally
inflicted
─The impact of the loss: direct losses or indirect losses
─The degree of expectancy: expected or unexpected
─Risk type, event type, and loss type
─The magnitude (or severity) of loss and frequency of loss
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9. OpRisk Components & Processes
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10. Case Study
 Its 2008, CS Computer Ltd is about to review its strategic plan;
a few months ago, it concluded its Risk & Control Self
Assessment
 Is there any need to refer to the output of its Risk Assessment?
 What should be the drivers of its strategic planning?
 What areas of its business require focus to achieve its growth
plan and desired first mover advantage with new business
opportunities?

11. Contents Of A Risk Register
 Risk description
 Risk owner
 Risk Category
 Cause of the Risk
 Impact of the Risk
 Probability / Frequency of
occurrence
 Risk Rating
 Contingency or Action plan
 Cost of Mitigation
 Deadline for
implementation
 Current status

12. Planning For Superior Service Delivery
 Develop Customer Service Policy
 Build customer loyalty
 Create a positive environment
 Establish an image of quality & professionalism
 Ensure prompt & effective customer complaints mgt
 Ensure management awareness of key criticisms
 Going the extra mile; beat competition
 Develop customized services
 Maintain customer feedback vehicle
 Train all staff on service delivery and products

13. Operational Risk Management Enablers
 Develop Customer Service Policy
Risk Governance
 Build customer loyalty
Track business volumes and demographics of customers (reward
systems, promotions, special events) using Key Risk Indicators (KRIs)
 Create a positive environment
Risk Assessments
 Establish an image of quality & professionalism
Track customer, agencies and regulators’ ratings with KRIs
 Prompt and effective customer complaints management
Track no. of customer complaints logged, treated and outstanding with
KRIs

14. Operational Risk Management Enablers (Cont’d)
 Management awareness of key criticisms
Risk Reporting
 Going the extra mile; beat competition
Peer group analysis by tracking relevant KRIs / Risk Reporting
 Develop customized services
Review of customer behaviour / Trend Analysis from RCSA and KRIs
 Maintain customer feedback vehicle
Track number of feedback, areas of business commended and areas not
mentioned at all (KRI, RCSA, Loss data collation)
 Training on service delivery and products
Track number of staff trained on service delivery, product offering &
number of complaints against staff attitude and product knowledge (KRI)

15. OpRisk Management – Strategic Planning
• Risk Register / Log
• Identification of prevalent risks
• Prioritized list of risks
• Impacts identified
• Residual risks
• Risk Appetite & Tolerance Levels
Desired business model, organizational
structures and business strategies

16. OpRisk Deliverables
The Economist

17. OpRisk Delivers Risk Management
Proper Operational Risk Management ensures Effective Holistic
Risk Management as it minimizes overall risk exposures in the
organization

18. Prioritizing Risks In Your Organization
 Risk prioritization must be based on the following:
The Risk Appetite of the organization
The Business Model of the organization
Regulatory Requirements
Business objectives in the short, medium and long terms
Risk – Reward Analysis
Response style of the organization
Maturity of the Risk-Aware Culture
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19. Improvements In Risk Communication
The Economist

20. Strategy & Risk Management Interplay
Strategy
RM
Objectives Assure Value-Creation Enhance Value
Value 1 Create new opportunities
Invest in new business activities that
promise gainful returns; expected to
exceed capital cost
Create new opportunities
Opportunity/threat identification /
mitigation in new activities, price deals to
compensate for such risks
Value 2 Improve performance
Increase returns on existing business
with better tech, processes, policies,
knowledge etc.
Improve performance
Measure loss exposure on cash flows.
Risk/Reward, aggregated capital,
scenario analyses, opportunity costs
Value 3 Harvest existing value
Evaluate, exit non-profitable business
Harvest existing value
Market analysis, risk mapping, risk
adjusted performance measurement
Value 4 Align risk-taking with risk appetite
Assurance that company is not gambling
its future; avoid risk averse behaviour or
excessive competitiveness
Align risk-taking with risk appetite
Discipline, focus & control, only take risks
equipped to handle, capital adequacy

21. Risk Management And Value Creation

22. Operational Risk Management
& Strategic Planning
 Evaluate risk profiles for strategic plans for enhanced
decision-making in developing a more realistic and
achievable robust plan
 Ensure that the policies, procedures, measures and
monitoring are established and continuously improved
 Provide periodic updates / reports to the Board and
Management on identified risks, milestone achievements,
and residuals risks

23. Poor OpRisk Management Leads To…
 Informal or reactive evaluation leading to either conservative
or exaggerated growth scenarios in developing strategic
plans
 Subjective reasoning feeding the strategic planning process
 Little or no risk adjustment mechanism
 Inability to maximize potential for creating sustainable
competitive advantage

24. TO CREATE VALUE
ALWAYS CONSIDER
OPRISK MGT STRATEGY

25. CONCLUSION
“For firms to succeed in this increasingly global and competitive
marketplace,
risk management must become a state of mind.
A systematic and proactive enterprise-wide approach to
managing risks is essential to
making risk management
an integral part of the company’s DNA”
ANURAG SAKSENA
– Chief Enterprise Risk Officer, Freddie Mac

26. Operational Risk
Management is the
Centre-piece of Risk
Management and an
OrgTanhizaatnionk’s yStoraute.g..y…
eneni.oduwole@dangote.com
Tel: 234-8033045896