Operational Risk and

Integrated Risk Management

CAIIB
Bank Financial Management
Module B
Risk Management
Prepared By: Jagat Nagar (M : 9909792440)
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Operational Risk and

Integrated Risk Management

Operational risk would arise due to deviation from normal and

Planned functioning of systems, procedures, technology and
human failures of ommission and commission.
Operational Risk based on causes and effects:
List of operational risk Cause- based: Page no 288
List of operational risk effect- based: Page no 288
List of operational risk event- based: Page no 289

Prepared By: Jagat Nagar (M : 9909792440)

- jagatnagar@yahoo.co.in

Operational Risk and

Integrated Risk Management
Operational Risk management :
There is proper policy for operational risk it cover
- Operational risk management structure
Board of Directors,
Risk management committee,
Saperate Department
Role of Internal Audit.
- Role and responsibilities
- Operational risk management processes
- Operational risk assessment/measurement methodologies.
- Information System Infrastructure
Prepared By: Jagat Nagar (M : 9909792440)
- jagatnagar@yahoo.co.in

Operational Risk and

Integrated Risk Management

Operational Risk Quantification: It can be done by 3 ways

a. The Basic Indicator Approach: Banks using Basic Indicator
Approach must hold capital for operational risk equal to the
average over the previous three years of fixed percentage %
of prositive annual gross income
b. The standardised Approach: Capital charge for different bank's
business line is calculated by multiplying gross income by a
factor assigned to that business line. (Pg. No. 293)

Prepared By: Jagat Nagar (M : 9909792440)

- jagatnagar@yahoo.co.in

Operational Risk and

Integrated Risk Management

c. Advanced Measurement Approaches (AMA):

Under the AMA, the regulatory capital requirement will equal to
risk measurement generated by system using the quantitative
and qualitative criteria.
- Use of the AMA is subject to supervisory approval.

Prepared By: Jagat Nagar (M : 9909792440)

- jagatnagar@yahoo.co.in

Operational Risk and

Integrated Risk Management
Estimated Impact of Internal Controls:
Estimated level of operational Risk = Page no: 294
Operational Risk Mitigation: Insurance cover are available for
mitigation of operational risks.
Scenario Analysis:
It is based on Experiance, external data.
This approach draws on the knowledge of experienced business
managers and experts.
Prepared By: Jagat Nagar (M : 9909792440)
- jagatnagar@yahoo.co.in

Operational Risk and

Integrated Risk Management
Integrated Risk management: Intergrated risk management is
managing all risks that are associated with all the activities
Undertaken across the entire organisation.
Proper implementation of integrated risk management help:
- Strategic aspects of risk with day-to-day operational activities.
- Facilitates greater transperency for investors and regulators.
- Enhancing revenue and earning growth.
- Controls downside risk potential.

Prepared By: Jagat Nagar (M : 9909792440)

- jagatnagar@yahoo.co.in

Operational Risk and

Integrated Risk Management

Integrated Risk management It consists,

-

Strategy
Organisation structure
Process, policies, procedures
Systems for integrated Risk limits and Risk reporting

Prepared By: Jagat Nagar (M : 9909792440)

- jagatnagar@yahoo.co.in

Operational Risk and

Integrated Risk Management

Thank You

Prepared By: Jagat Nagar (M : 9909792440)

- jagatnagar@yahoo.co.in