Operational Risk Management

Preface xiii
 
Acknowledgments xv
 
Chapter 1 Definition and Drivers of Operational Risk 1
 
The Definition of Operational Risk 1
 
2012 London Olympics: A Case Study 5
 
Operational Risk Management and Operational Risk Measurement 9
 
Drivers of Operational Risk Management 13
 
Key Points 14
 
Review Questions 14
 
Notes 15
 
Chapter 2 The Regulatory Push 17
 
History of the Basel Accords 17
 
Rules of the Accords 22
 
Adoption of Basel II in Europe 27
 
Adoption of Basel II in the United States 27
 
Impact of the Financial Crisis 29
 
Basel III 34
 
Key Points 36
 
Review Questions 36
 
Notes 37
 
Chapter 3 The Operational Risk Framework 39
 
Overview of the Operational Risk Framework 39
 
The Foundations of the Framework 40
 
The Four Data Building Blocks 42
 
Measurement and Modeling 44
 
Reporting 44
 
Risk Appetite 45
 
Key Points 45
 
Review Questions 46
 
Note 46
 
Chapter 4 Operational Risk Governance 47
 
Role of Governance 47
 
First Line of Defense 50
 
Second Line of Defense 51
 
Third Line of Defense 63
 
Risk Committees 66
 
Key Points 68
 
Review Questions 69
 
Notes 69
 
Chapter 5 Culture and Awareness 71
 
Winning over the Firm 71
 
Marketing and Communication 72
 
Agile 73
 
Training 75
 
Planning 76
 
The "Use Test" 82
 
Key Points 84
 
Review Question 84
 
Note 84
 
Chapter 6 Policies and Procedures 85
 
The Role of Policies, Procedures, Guidelines, and Standards 85
 
Best Practices 88
 
Operational Risk Policy 88
 
Sample Operational Risk Policy 89
 
Sample Standards, Procedures, and Guidelines 95
 
Key Points 97
 
Review Question 97
 
Note

PHILIPPA GIRLING, PhD, is Chief Risk Officer at Varo Bank N.A. She has over 25 years of experience in global financial services and is a recognized risk management leader who has authored two popular operational risk textbooks. She is a sought-after public speaker on enterprise risk management and digital transformation and was named as one of the decade's "Top Fifty Faces of Operational Risk" in 2006.