Index

    • Action tracking reporting, 250–253
    • Advanced Measurement Approach (AMA), 208–221
      • hybrid approach, 221
      • loss distribution approach (LDA), 213–219
      • quantitative requirements, 209–213
      • scenario analysis approach, 219–221
    • Agile, 73–74
    • Audit, 63–64
    • Banking scandals, 278–280
    • Bank of International Settlements (BIS), 17–22, 183, 185, 199, 202, 275
    • Basel Accords, 1–4, 6, 8, 10, 17–35
      • Basel I, 23
      • Basel II, 1–4, 6, 9–10, 23–28, 103–112, 126–128
        • business line categories, 127
        • capital modeling, 197–199, 202, 204, 205, 208, 213, 223, 232
        • disclosure, 232
        • European adoption of, 27
        • limitations of, 29
        • operational risk event categories, 104
        • Pillar 1, 24–26
        • Pillar 2, 10, 26–27, 259, 284, 311, 315
        • Pillar 3, 27
        • scenario analysis, 44
        • Standardized Approach, 202–208
        • U.S. adoption of, 27–28
      • Basel III, 10, 34–35
        • capital calculation, 11, 44, 223–235
        • Standardized Approach, 223–235
    • Basel Committee on Banking Supervision (BCBS), 20–22, 34–35, 48–51, 65–67, 82, 259–263
    • “Basel III: Finalising post-crisis reforms” (2017), 65
    • Basic Indicator Approach (BIA), 199–201
    • Business continuity metrics, 159
    • Business continuity planning (BCP), 60, 61
    • Business indicator (BI), 225–226
    • Business indicator component (BIC), 226–229
    • Business line categories, 127
    • Capital modeling, 197–199, 197–238, 202, 204, 205, 208, 213, 223, 232
      • Advanced Measurement Approach (AMA), 208–221
        • hybrid approach, 221
        • loss distribution approach (LDA), 213–219
        • quantitative requirements, 209–213
        • scenario analysis approach, 219–221
      • Basic Indicator Approach (BIA), 199–201
      • disclosure, 232–235
      • future of capital requirements, 223–235
      • insurance, 221–223
      • operational risk capital, 197–199
      • Standardized Approach (TSA), 202–208
        • alternative, 205–206
        • business indicator (BI), 225–226
        • business indicator component (BIC), 226–229
        • disclosure, 232–235
        • future of, 206–208
        • internal loss multiplier (ILM), 230–232
        • new guidance, 224–235
    • Capital requirements, future of, 223–235
    • Chief administrative officer (CAO), 56–57
    • Chief compliance officer, 57–58
    • Chief financial officer (CFO), 56–57
    • Chief operating officer (COO), 56–57
    • Chief risk officer (CRO), 53–56
    • Citi, 4
    • Climate risk, 311–312, 311–312
    • Coe, Lord Sebastian, 6, 9
    • Compliance metrics, 157
    • “Core Principles for Effective Banking Supervision” (2012), 261
    • “Core Principles for Effective Banking Supervision” (2019), 283
    • Corporate Governance Principles for Banks (2015), 262–263, 266, 284
    • COVID-19 pandemic, 5, 9, 10, 277, 310, 312–314
    • Credit Suisse annual report (2011), 232–233
    • Credit Suisse Archegos scandal (2021), 324–329, 343–344
    • Culture and awareness, 71–84
      • agile, 73–74
      • marketing and communication, 72–73
      • planning, 78–82
        • major deliverables checklist, 76–82
        • sample project milestones, 81
      • success of framework, 71
      • training, 75
      • “use test,” 82–83
    • Deliverables, checklist, 76–82
    • Deutsche Bank, 3
    • Deutsche Bank annual report (2011), 233–234
    • Disclosure:
      • Basel Accords, 232
      • capital modeling, 232–235
      • Standardized Approach, 232–235
    • DNB Bank ASA anti-money laundering scandal (2019), 329–331, 345
    • Dodd-Frank Act, 31–33
    • Enterprise risk management (ERM), 12–13
    • Exception monitoring, 151–152
    • External loss data, 135–148
      • challenges of, 139–147
        • Société Générale and the external event that shook the operational risk world, 142–147
      • external loss data, sources of, 136–139
        • consortium data, 137–139
        • subscription databases, 137
      • external operational risk event data, 135–136
    • “Finalizing Post-Crisis Reforms” (2017), 224
    • Financial statement metrics, 160–161
    • Fintech scandals, 281–282
    • Fraud risk management, 309–310, 309–310
    • Governance, risk, and compliance (GRC), 292–301
      • assessment convergence, 293–298
        • converged data, 296
        • taxonomies, 296–297
        • tools, 297–298
      • convergence of metrics, 298–301
    • Group of Twenty (G20), 29
    • Hybrid approach, 221
    • Information security, 61–62
    • Insurance, 221–223
    • “Interagency Guidance on the Advanced Measurement Approaches for Operational Risk” (2011), 31
    • Internal loss multiplier (ILM), 230–232
    • “International Convergence of Capital Measurement and Capital Standards, a Revised Framework,” 2–3, 24
    • JPMorgan Chase, 3, 130
      • annual report (2011), 234–235
      • “whale” case study, 319–324
    • Kerviel, Jerome, 142–145
    • Key risk indicators (KRIs), 44, 149–161, 248–249
      • challenges, 155
      • exception monitoring, 151–153
      • key control indicators (KCIs), 151
      • key performance indicators (KPIs), 151
      • lagging indicators, 152, 153
      • leading indicators, 152–153
      • metric examples, 155–161
        • business continuity, 159
        • client, 159
        • compliance, 157
        • financial statement, 160–161
        • people, 156
        • technology and infrastructure, 158
        • trade execution and process management, 160
      • reporting, 248–249
      • selecting, 153–154
      • standards, 154–155
      • thresholds, 154
    • Knight Capital technology glitch, 331–332, 345–346
    • Lagging indicators, 152, 153
    • Leading indicators, 152–153
    • Legal risk management, 307–308, 307–308
    • LIBOR scandal, 278–280
    • London Olympics (2012) case study, 5–9
    • Loss data collection, 42–43
    • Loss distribution approach (LDA), 213–219
    • Marketing and communication, 72–73
    • Markets in Financial Instruments Directive (MiFID), 13
    • Measurement and modeling, 44
    • Metrics examples, 155–161
      • business continuity, 159
      • client, 159
      • compliance, 157
      • financial statement, 160–161
      • people, 156
      • technology and infrastructure, 158
      • trade execution and process management, 160
    • Monte Carlo Simulation, 217–219
    • New business/product approval, 63, 305–306
    • Objectives and key results (OKRs), 149
    • Office of the Comptroller of the Currency (OCC), 3, 316
    • Operational risk:
      • capital (see Capital modeling)
      • and convergence, 291–303
        • converged or GRC reporting, 301–302
        • governance, risk, and compliance (GRC), 292–301
        • operational risk as catalyst, 291–292
      • coordinators, 59–61
      • definition and drivers of, 1–14
        • definition, 1–5
        • drivers, 13–14
        • management and measurement, 9–13
        • 2012 London Olympics case study, 5–9
      • framework, 39–48
        • culture and awareness, 41
        • governance, 40–41
        • key risk indicators, 44
        • loss data collection, 42–43
        • measurement and modeling, 44
        • overview of, 39–40
        • policies and procedures, 41–42
        • reporting, 44–45
        • risk and control self-assessment, 43
        • risk appetite, 45
        • scenario analysis, 43–44
      • governance, 47–70
        • first line of defense, 50–51
        • risk committees, 66–68
        • role of, 47–50
        • second line of defense, 51–63
        • third line of defense, 63–65
      • reputational risk and, 275–290
      • Société Générale and the external event that shook the world of, 142–147
    • Operational risk capital, 197–199
    • Operational Riskdata eXchange Association (ORX), 124–125, 136–139, 146
    • Operational risk event categories, 104
    • Operational risk event data standards, minimum, 113–129
      • amount, 115–121
        • accounting adjustments or timing events, 120–121
        • gains, near-misses, and opportunity costs, 119–120
        • indirect costs, 118–119
        • recoveries, 121
        • Standardized Approach, 117–118, 120–122, 124
      • boundary events identified, 128
      • business line, criteria for allocation to, 126
      • central and supporting functions, criteria for allocation to, 126, 128
      • comprehensive, 113–114
      • date, 121–124
      • description and causes, 124–125
      • impacted departments, 128
      • nonfinancial impacts, 129
      • threshold, 114–115
    • Operational risk event loss data:
      • external, 135–136
      • internal, 99–134
        • data collection, 129–131
        • internal operational risk events, 100–103
        • minimum operational risk event data standards, 113–129
        • operational risk event data, 99
        • risk event categories, 103–112
    • “Operational Risk—Supervisory Guidelines for the Advanced Measurement Approaches” (2011), 82, 115–117
    • Pandemic planning, 312–314, 312–314
    • People metrics, 156
    • People risk management, 308–309, 308–309
    • Pillar 1 (Basel Accords), 24–26
    • Pillar 2 (Basel Accords), 10, 26–27, 259, 284, 311, 315
    • Pillar 3 (Basel Accords), 27
    • Planning, 78–82
    • Policies and procedures, 85–97
      • best practices, 88
      • operational risk policy, 88–95
      • role of, 85–87
        • documentation hierarchy, 87
      • sample standards, procedures, and guidelines, 95–97
        • extract from loss data procedures document, 96
        • extract from loss data standards document, 95–96
        • linkage between documents, 96–97
    • Policy office, 63
    • “Principles for Effective Risk Data Aggregation and Risk Reporting” (2013), 300–301
    • “Principles for Enhancing Corporate Governance” (2010), 48–49, 54
    • “Principles for the Sound Management of Operational Risk and the Role of Supervision” (2011), 260–261
    • Quantitative requirements, of AMA, 209–213
    • Regulatory push, 17–38
      • Basel Accords, 17–35
        • European adoption of Basel II, 27
        • rules of, 22–27
        • U.S. adoption of Basel II, 27–28
      • Basel III, 34–35
      • financial crisis, impact of, 29–33
        • Basel II, limitations of, 29
        • European response to, 30
        • U.S. response to, 30–33
    • Regulatory risk management, 308, 308
    • Related risk management activities, best practices in, 305–317
      • climate risk, 311–312
      • fraud risk management, 309–310
      • legal risk management, 307–308
      • new-product approval, 305–306
      • pandemic planning, 312–314
      • people risk management, 308–309
      • regulatory risk management, 308
      • strategic risk, 314–316
      • supplier and third-party risk, 306–307
      • technology risk management, 310
    • Reporting, 44–45, 239–255
      • action tracking, 250–253
      • capital, 249–250
      • consolidated view, 253, 254
      • dashboards, 253
      • key risk indicator (KRI), 248–249
      • operational risk event, 241–247
        • external, 247
        • impact of gains on, 241, 243
        • internal losses by risk category, 245, 246
        • timeliness, 245, 247
        • trends in internal losses, 243–244
      • risk and control self-assessment, 247–248
      • role of, 239–241
      • scenario analysis, 249
    • Reputational risk, 275–290
      • definition of, 275–277
      • impact, 277–283
      • management framework, 284–289
      • regulatory oversight of, 283–284
    • “Revisions to the Principles for Sound Practices for the Management of Operational Risk” (2021), 49
    • “Revisions to the Principles for the Sound Management of Operational Risk” (2021), 39, 100, 101, 263–264
    • Risk and control self-assessment (RCSA), 43, 163–179, 247–248
      • best practices, 173–178
        • appropriate technology, implementing, 175
        • backtesting or validating results, 178
        • document results, 174–175
        • existing assessments, leveraging, 177
        • interviewing participants beforehand, 173
        • mitigating actions, identifying, 175
        • reporting, 247–248
        • review of available background data from other functions, 173
        • review of external events, 174
        • review of internal loss data, 174
        • review of past RCSAs and related RCSAs, 174
        • scheduling appropriately, 177–178
        • scoring methodology, 175
        • selecting and training participants, 174
        • taxonomies, ensuring completeness using, 175–176
        • themes identified, 177
      • methods, 166–169
        • hybrid, 169
        • questionnaire approach, 167–168
        • workshop approach, 168–169
      • role of assessments, 163–166
        • control assessments, 165
        • RCSAs, 166
        • risk and control assessments, 165–166
      • scoring methods, 169–173
        • control effectiveness, 170–171
        • probability or frequency, 171, 172
        • risk impact, 171, 172
        • risk severity, 172–173
    • Risk appetite, 45, 257–273
      • framework, implementing, 264–268
        • firmwide, promoting, 267
        • governance, 266–267
        • monitoring, 267–268
        • as strategic decision-making tool, 265–266
      • monitoring, 268–272
        • appetite, 269
        • capacity, 269
        • limits/indicators, 270–272
        • tolerance, 269
      • regulatory expectations, 259–264
      • role of, 257–250
    • Risk categories, 6–8
    • Risk event categories, 103–112
      • Business Disruption and System Failures, 110–111
      • Clients, Products, and Business Practices, 108–109
      • Damage to Physical Assets, 109–110
      • Employment Practices and Workplace Safety, 107–108
      • Execution, Delivery, and Process Management, 111–112
      • External Fraud, 106–107
      • Internal Fraud, 105–106
    • Robinhood, 283
    • Sarbanes-Oxley Act (SOX), 13–14, 62, 250, 251
    • Scenario analysis, 43–44, 181–196, 249
      • approaches, 183–192, 219–221
        • appropriate representatives, 188
        • background preparation, 185–187
        • changes, process responsive to, 190
        • clearly defined and repeatable process, 185
        • documentation, 189–190
        • independent challenge and oversight, 190
        • mitigating biases, mechanisms for, 191–192
        • modeling operational risk capital, 219–221
        • qualified and experienced facilitators, 187–188
        • structured process for selection of data, 188–189
      • output, 193–195
      • reporting, 249
      • role of, 181–183
    • Securities and Exchange Commission (SEC), amendments to net capital rule, 27
    • Senior Supervisors Group (SSG), 262–265
    • Société Générale, 135, 136, 142–147
    • Solvency II, 13
    • “Sound Practices for the Management and Supervision of Operational Risk” (2003), 259–260
    • “Sound Practices for the Management and Supervision of Operational Risk” (2011), 66
    • Standardized Approach (Basel Accords), 202–208
    • Standardized Approach (TSA), 202–208
      • alternative, 205–206
      • business indicator (BI), 225–226
      • business indicator component (BIC), 226–229
      • disclosure, 232–235
      • future of, 206–208
      • internal loss multiplier (ILM), 230–232
      • new guidance, 224–235
    • Stock prices, reputational impact on, 282–283
    • Strategic risk, 314–316, 314–316
    • Supplier and third-party risk, 306–307, 306–307
    • Technology and infrastructure metrics, 158
    • Technology risk management, 310
    • Tokyo Summer Olympics (2020), 5, 8
    • Trade execution and process management metrics, 160
    • Training, 75, 75
    • UBS unauthorized trading scandal, 333–339, 346–349
    • “Use test,” 82–83, 82–83
    • Validation, 65
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