1. Risk Management
University of Economics, Kraków, 2012
Tomasz Aleksandrowicz

2. operational risk management
credit risk definition
credit bureau and rating agencies
credit risk management

3. operational risk
• risk of loss resulting from inadequate or failed
internal processes, people and systems or from
external events
• operational risk is much harder to identify than
market and credit risk

5. people risk
• Employee collusion/fraud
• Employee error
• Employee misdeed
• Employers liability
• Employment law

6. process risk
– Transaction Risk
– Documentation/contract risk.
– Operational Control Risk
– Model Risk

7. technology risk

8. external risk

9. causes of operational risk
• Internal fraud
• External fraud
• Employment practices and workplace safety
• Clients, products and business practices.
• Damage to physical assets.
• Business disruption and system failures
• Execution, delivery and process management

10. 3 approaches in banking

11. key risk indicators

12. basic indicator approach
• simplest operational risk measurement method
• banks has to hold capital reserves for operational loss
• average income gross income from previous 3 years times
given percentage (alpha)
• years with negative or zero income excluded
• committee alpha percentage – 15% (represents industry
average operational risk)
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13. Standardized Approach
• more complex method of operational risk measurement
• banks has to hold capital reserves for operational loss
• three-year average across each of the business lines in each
year times given percentage (beta)
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14. standardized Approach – beta factor
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15. advanced measurement approach
(AMA)
• comprehensive method based on bank’s internal operational
risk measurement system
• quantitative and qualitative criteria
• subject of regulatory approval
• bank must be able to demonstrate that its approach captures
even unlikely events
• minimum five-year observation period of internal loss data
• external data could be used
• high-severity events must be subject of scenario analysis and
use external data and expert advisory
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