Managing Operational Risk

Erscheinungsjahr 2002
ISBN: 978-1-85564-891-3
Verlag: Euromoney

Buch, Englisch, 276 Seiten

Operational risk should take an equal place alongside credit and market risk in the risk management strategy of all financial institutions. This volume is an invaluable guide to operational risks and their mitigation. Divided into four sections it begins by identifying twelve factors that characterise operational risk. The first section examines operational risk in the contexts of merchant, corporate, investment and private banking and the insurance industry. The second demonstrates how operational risk can be managed and controlled and examines cases of operational failure, including Credit Lyonnais and NatWest Markets. The third identifies legal risk including cross-border conflicts of law, compliance and taxation issues and environmental factors. The final section assesses the risk in payments and settlements including dematerialisation, the role of IT solutions, handling intraday exposure and delivery vs payment issues. Every financial institution should understand and protect against these risks and this unique and timely guide will ensure you establish an effective strategy for managing operational risk.

".another tour de force on the part of Dr. Chorafas.the true nature and ramifications of operational risk are superbly illustrated" Gunnar T. Andersen, Managing Director & Member of the Executive Board, International Banking & Treasury, Landsbanki Íslands h.f.

Every financial institution should understand and protect against these risks and guide will ensure you establish an effective strategy for managing operational risk.

Autoren/Hrsg.

Chorafas, Dimitris N

Fachgebiete

• Wirtschaftswissenschaften Finanzsektor & Finanzdienstleistungen Finanzsektor & Finanzdienstleistungen: Allgemeines
• Wirtschaftswissenschaften Finanzsektor & Finanzdienstleistungen Bankwirtschaft
• Wirtschaftswissenschaften Betriebswirtschaft Management Risikomanagement

Inhaltsverzeichnis

1. Operational risk defined
Introduction
Dimensions in the definition of operational risk
Operational risk mismanagement
Aggravating factors
The Basle Committee's approach
Higher capital requirements
Organisational and skill requirements
Notes

2. Operational risk in retail, corporate and investment banking
Introduction
Retail banking: New opportunities and risks
Reputation risk, product innovation and non-bank competition
From single product commercial banks to conglomerates
Transfer pricing, loans and derivatives
Structuring risk management
Notes

3. Operational risk in private banking
Introduction
Investment banking and personal banking synergy
Asset management targeting the wrong population
Discretionary portfolio management
Investment managers and funds: Some precautions
Biased advice
Notes

4. Operational risk in insurance
Introduction
Insurance companies enter retail banking
Risks specific to insurance
Regulatory issues impacting on operational risk
Finite risk and alternative risk transfer
Captives
Catastrophe reinsurance through the capital markets
Notes

Part Two - Managing and controlling operational risk

5. Agency costs: A prudent operational risk policy
Introduction
Service economy vulnerability
Identifying risk-creating activities
Rigorous internal control systems
Documentation risk
Solutions to operational risk control
Notes

6. The dangers of uncontrolled operational risk
Introduction
Losing the ability to say 'No!': Crédit Lyonnais
Debt transfer: NatWest and Banca di Roma
Crony capitalism: Daewoo
Metallgesellschaft and the Schneider affair
Derivatives: McDonald's
Measuring, monitoring and analysing risk
Notes

7. The role of improved organisation and structure
Introduction
Sound management via solid organisational fundamentals
Internal control and transparency
The MeesPierson model
Organisational studies, staffing and cost control
Streamlining operations and monitoring essentials
Notes

8. Using technology to bend the curve of operational risk
Introduction
Technology innovators
Case study: Lloyds Bank forex deals
Mathematical risk analysis
Developing an approach to risk governance
System analysis and design for private banking
A process control perspective
Notes

Part Three Legal risk

9. Legal risk: An evolving and complex issue
Introduction
Contract enforcement
The board of directors and shareholder activism
Clarifying the sources of legal risk
Insurance contracts and master agreements
The impact of political risk
Notes

10. Management responsibility for legal risk
Introduction
CEO accountability
Using discovery in assessing exposure
Transparency and collateral
Taking stock of legal risk with derivatives
Internal and external procedures
Notes

11. Legal risk and taxation rules: A synergy analysis
Introduction
Conflicting international tax regimes
Shifting ground in international taxation
Technology and the legal aspects of taxation
Expert systems for investing and tax advice
Dangers of regulatory and legislative variance
Notes

12. Physical and economic aspects of environmental risk
Introduction
The Comprehensive Environmental Response, Compensation and Liability Act
Social and financial problems with environmental risk litigation
The economic environment and legal risk
Unresolved social, political and taxation issues
Scientific evidence
Notes
Part Four Rethinking classical operational risk: Payments and settlements

13. The new generation of payments systems
Introduction
The evolution of payments systems
Business architecture: Home of the payments system
Model of a real-time global payments system
A microscopic viewpoint
Macroscopic aspects of payments risk
Notes

14. Intraday exposure
Introduction
Protecting institutions in the payments stream
SQC charts: A solution to intraday exposure?
Monitoring intraday payments
Who guarantees major default in intraday payments?
The role of the Internet
Notes

15. National and cross-border settlements solutions
Introduction
Problems with current settlement systems
New concepts of settlement risk
Stock exchange mergers and settlement risk
Intraday overdrafts: Payments and settlements
Designing and implementing RTGS systems
Origins of the EU RTGS system
Challenges faced by the EU's RTGS solution
Notes

16. Dematerialisation, securities lending and DVP
Introduction
DVP, custody and the management of settlement risk
Risk analysis of dematerialisation operational requirements
DVP limitations
Securities lending and operational risk
Designing, developing and implementing DVP infrastructure
Notes

Über Autor(innen)

Professor Dr. Dimitris N. Chorafas has, since 1961, advised financial institutions and industrial corporations on strategic planning, risk management, computer and communications systems, and internal controls. A graduate of the University of California, Los Angeles, the University of Paris, and the Technical University of Athens, Dr Chorafas has been a fulbright scholar.

Among the multinational corporations for which Dr Chorafas has worked as consultant to top management are General Electric, Bull, Univac, Honeywell, Digital Equipment Corp, Olivetti, Nestle, Omega, Italcementi, AEG-Telefunken, Olympia, Osram, Antar, Pechiney, the American Management Association and a range of other firms in Europe and the United States.

Dr Chorafas has served on the faculty of the Catholic University of America and as visiting professor at five other American universities, one Canadian, one Swiss and one German university. More that 6,000 banking, industry and government executives have participated in his seminars in the United States, England, Germany, other European countries, Asia and Latin America.