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Objectives of a Sound Enterprisewide Risk Management Framework • Manage uncertainty embedded in business operations in order to – increase confidence in the achievement of the bank’s objectives, – protect its reputation and – minimize its financial losses reducing earning volatility. • Helping to achieve a sound balance between expected benefits, costs and risks of the bank’s operations. • Optimizing cost/benefit trade-off between the bank’s risks and controls • Promoting risk awareness in bank’s culture and values. Effectively managing risk requires a foundation designed to turn raw data into information that supports managerial decision making MANAGEMENT • Awareness of real exposures Economic Profit INFORMATION PROCESSES & METRICS • Loss data collection FOUNDATION • Risk strategy, tolerance • Roles and responsibilities • Policies and procedures • Risk definition and categorization • Indicator data collection • Control selfassessment • Risk assessment and analysis data • Expected Loss – how much do I lose on average • Unexpected Loss – how much I could reasonably expect to lose in a bad year • Control Scores – how good are the controls I have in place • Issue log data • Follow up action reports Management & Control Quality • Knowledge of controls quality • Cost benefit analysis • Improved risk mitigation and transfer strategy • Incentive system All Risk Mangements Standards - although using a different language - have some elements in common “Analyse” “Identify” Establish Environment and Infrastructure “Respond” “Communicate”