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Interesting Reading

Libor scandal rumbles on
Publication date: 22nd February 2012
Publication: RiskBusiness International
Author: RiskBusiness International
In February, the Royal Bank of Scotland has reportedly sacked three traders connected to the regulatory investigation into the rigging of the London interbank offered rate Libor. A leading trader at broker ICAP has been dismissed. Barclays, Citigroup, Deutsche Bank and UBS are also under investigation. In the past few days, UBS has turned whistleblower in a bid to stave off the worst fines with its disclosure to regulators that its employees colluded in rigging Libor.

Credit ratings agencies take a renewed interest in operational risk management
Publication date: 22nd February 2012
Publication: RiskBusiness International
Author: RiskBusiness International
Credit rating agencies have always been interested in a firm’s operational risk management policies and procedures since Basel II formalised the risk discipline, however since the advent of Solvency II the rating agencies are taking a more intrusive look at insurers approach to operational risk management.

Cybercrime presents a very clear and present danger to all firms
Publication date: 22nd February 2012
Publication: RiskBusiness International
Author: RiskBusiness International
On Monday February 16 it emerged that several stock exchanges around the world were the victim of a worldwide distributed denial of service (DDoS) attack. The Stock Exchange of Thailand, Bursa Malaysia, Nasdaq OMX, Bats Trading and the Chicago Board Options Exchange, have all reported DDoS attacks.

Although responsibility for the attacks was not officially claimed, it has been suggested that a group called “the 99 per cent” linked to the Occupy Wall Street movement was responsible.

RiskBusiness February newsletter
Publication date: 22nd February 2012
Publication: RiskBusiness International
Author: RiskBusiness International

Fund managers’ survey casts doubt over the Eurozone survival
Publication date: 19th January 2012
Publication: RiskBusiness International
Author: RiskBusiness International
The majority of the 286 fund managers surveyed by Bank of America Merrill Lynch between January 6 and January 12, 2012 expect a country to leave the Eurozone within a year. As demonstrated by this survey, investors now seem to be echoing the concerns of bankers and economists the world over.

Cyber-attack surge on financial services firms
Publication date: 19th January 2012
Publication: RiskBusiness International
Author: RiskBusiness International
Over the past 12 months, there has been a demonstrable uptick in the number of cyber-attacks on financial services and e-commerce firms. The latest was just yesterday (January 18) when Israeli hackers, called the IDF-Team, launched attacks on the websites of the Saudi Stock Exchange (Tadawul) and the Abu Dhabi Securities Exchange (ADX) in retaliation for an attack on the Tel Aviv Stock Exchange’s website by a Saudi hacking collective called Nightmare on January 16. Although the idea of a cyber-war to many people seems to border on the realms of science fiction, it is real and it is being waged now. Financial services firms are regarded as government assets and so legitimate targets for hackers for financial and commercial gain or political motives.

Swiss banking system under fire
Publication date: 19th January 2012
Publication: RiskBusiness International
Author: RiskBusiness International
Lately it seems incidences involving Swiss banks are constantly making headlines. The political witch hunt that culminated in the resignation of central bank head Philip Hildebrand, sparked by a tip-off from a whistleblower in the IT department of Sarasin Bank; the loss of Credit Suisse client data while being passed to tax authorities; PEP compliance failings found at four banks; UBS fined for improper pricing of funds – these recent events have cast long shadows over the ethical behaviour of both the Swiss banks and Swiss bankers alike.

Olympus accounting scandal – a failure of J-Sox?
Publication date: 19th January 2012
Publication: RiskBusiness International
Author: RiskBusiness International
Some may argue that the introduction of the Financial Instruments and Exchange Act in Japan – known by many as J-Sox thanks to its similarity to the US Sarbanes-Oxley Act – was intended to increase transparency, foster good corporate governance practices and stem the rate of high-profile corporate failures in Japan. Prior to the implementation of J-Sox in late 2007, fraudulent financial reporting by some Japanese companies appeared to be rife, while in 2005 around 14% of listed companies were forced to issue financial restatements. However, as the Olympus accounting scandal has shown, J-Sox seems to have failed in its goals - or rather government officials have failed to enforce it.

Costa Concordia - lessons in operational risk
Publication date: 19th January 2012
Publication: RiskBusiness International
Author: RiskBusiness International
The tragic Costa Concordia cruiseliner accident, which so far has claimed eleven lives, raises a number of operational risk issues. Chief among them are improper practices, potentially criminal negligence and a possible failure of early-warning alarms.

Using scenarios: case studies
Publication date: 19th January 2012
Publication: RiskBusiness International
Author: RiskBusiness International
The topic of scenario analysis remains central amongst operational risk debate, whether within the firm, at industry events or between the firm and its regulators and supervisors. RiskBusiness has been working with many clients in the area of scenarios, which has resulted in the development and publication of the RiskBusiness Scenario Library, a sister service to the KRI Library. Having just completed a project which covered the design of a capital measurement scenario program, the documentation and approval of policy and supporting documentation, the selection of the appropriate scenario set, the assessment across the firm of the scenarios, followed by their analysis and delivery into the capital model, we thought readers may find a series of mini case studies on some of our scenario projects interesting

Citi again accused of violating SOX
Publication date: 20th December 2011
Publication: RiskBusiness International
Author: RiskBusiness International
On December 4, US television program 60 Minutes accused Citigroup of violating the Sarbanes-Oxley Act of 2002 (SOX) by signing a SOX statement attesting that there were no problems with the firm’s internal controls when, it says, there were many.

Building a KRI program under pressure
Publication date: 20th December 2011
Publication: RiskBusiness International
Author: RiskBusiness International
The ultimate aim of implementing a KRI program is to have real-time information on where the risk exposures are within the organization. Similar to the way in which the fuel level, oil pressure, engine temperature gauges and speedometer in a car all provide vital, real-time information about safety on a road trip, KRIs are the only mechanism for management to get real-time targeted exposure feedback necessary to make mid-course adjustments as required.

One head of operational risk at an Eastern European bank, which had only a few short months to implement a Risk Control and Self Assessment (RCSA) and a Key Risk Indicator (KRI) program, shares their experiences.

CME head accuses Corzine of knowingly transferring client money
Publication date: 20th December 2011
Publication: RiskBusiness International
Author: RiskBusiness International
The row over MF Global’s missing millions rumbles on as Jon Corzine testifies before the House Agricultural Committee and House Committee on Financial Services Sub-Committee on Oversight & Investigations that he doesn’t know where the money is.

Pillar 3 disclosure requirements enhanced by the Basel Committee
Publication date: 20th December 2011
Publication: RiskBusiness International
Author: RiskBusiness International
In an attempt to improve transparency in the light of the weaknesses exposed in the way banks disclose their capital positions during the global financial crisis, the Basel Committee on Banking Supervision has issued more detailed Pillar 3 disclosure requirements. The new set of requirements sets out a common template for all banks to use to disclose their capital positions – the sections are summarised in this article.

Internal audit: The last line of defence
Publication date: 20th December 2011
Publication: RiskBusiness International
Author: RiskBusiness International
The global financial crisis, which began in earnest in September 2008 when Lehman Brothers collapsed, exposed gaps in the three lines of defence approach, specifically the weaknesses inherent in the third line of defence - internal audit. The Basel Committee on Banking Supervision, as part of its efforts to address bank supervisory issues and enhance supervision, has issued revised supervisory guidance for assessing the effectiveness of the internal audit function in banks.

Assessing the operational exposures of the collapse of the Eurozone
Publication date: 20th December 2011
Publication: RiskBusiness International
Author: Mike Finlay
What would the end of the Euro or the departure of existing Eurozone members actually mean from an operational perspective? What would firms, in many cases irrespective of industry type, need to do to continue to do business?
With this in mind, RiskBusiness has prepared the following list of potential issues for you to consider and, if appropriate, to take action on.

RiskBusiness December newsletter
Publication date: 20th December 2011
Publication: RiskBusiness December Newsletter
Author: RiskBusiness International

Poor management and light-touch regulation to blame for the failure of RBS
Publication date: 20th December 2011
Publication: RiskBusiness International
Author: RiskBusiness International
Poor management and light-touch regulation to blame for the failure of the Royal Bank of Scotland, says a report from the UK Financial Services Authority.

Banks told to prepare for the collapse of the Euro
Publication date: 20th December 2011
Publication: RiskBusiness International
Author: RiskBusiness International
In early December, the UK Financial Services Authority (FSA) told the UK’s largest banks 'accelerate their contingency planning for the break-up of the euro', while central banks in Europe put in place contingency plans for reviving old currencies.

Rogue trading, no training: the connections
Publication date: 20th December 2011
Publication: RiskBusiness International
Author: RiskBusiness International
Allowing traders to regularly breach their trading limits without censure, while profitable at least, sends out the wrong signals from senior management and encourages rogue trading. More financial training in the front, middle and back offices is what is needed to help stamp out this problem, not more regulation, argues Ariane Chapelle, PhD, Professor of Finance and Risk Management at the University of Brussels.

Federal Reserve issues enhanced prudential standards and early remediation requirements
Publication date: 20th December
Publication: Enhanced Prudential Standards and Early Remediation Requirements for Covered Companies
Author: Federal Reserve System
The Federal Reserve Board has proposed steps to strengthen regulation and supervision of large bank holding companies and systemically important nonbank financial firms. The proposal, which includes a wide range of measures addressing issues such as capital, liquidity, credit exposure, stress testing, risk management, and early remediation requirements, is mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Definition of capital disclosure requirements - BCBS consultative document
Publication date: 19th December 2011
Publication: Definition of capital disclosure requirements - consultative document
Author: Basel Committe on Banking Supervision
The Basel Committee on Banking Supervision has published proposed disclosure requirements that aim to improve the transparency and comparability of a bank's capital base. During the financial crisis, market participants and supervisors were hampered in their efforts to undertake detailed assessments of banks' capital positions and make cross jurisdictional comparisons as a result of insufficiently detailed disclosure and a lack of consistency in reporting between banks and across jurisdictions. This lack of clarity may have contributed to uncertainty during the financial crisis. In addition to improving the quality and level of required capital, Basel III will establish certain high level disclosure requirements to improve transparency of regulatory capital and enhance market discipline. These proposed disclosure requirements are set out in the Basel Committee's consultative document.

"Principles for the supervision of financial conglomerates" released by the Joint Forum
Publication date: 19th December 2011
Publication: Principles for the supervision of financial conglomerates - consultative document
Author: Basel Committee on Banking Supervision
The Joint Forum released today a consultative paper on Principles for the Supervision of Financial Conglomerates.

The proposed principles, which revise the Joint Forum's 1999 principles, provide national authorities, standard setters and supervisors with a set of internationally agreed principles that support consistent and effective supervision of financial conglomerates and in particular those financial conglomerates that are active across borders.

The proposed principles are organized into five sections: Supervisory powers and authority; Supervisory responsibility; Corporate governance; Capital adequacy and liquidity; and Risk management.

The principles set out the need for a financial conglomerate to have a comprehensive risk management framework to manage and report group-wide risk concentrations and intra-group transactions and exposures. Greater emphasis is placed on the financial conglomerate's ability to measure, manage and report all material risks to which it is exposed, including those stemming from unregulated entities and activities. The principles focus on group-wide risk management culture and appropriate tolerance levels; addressing risks associated with new business areas and outsourcing; group-wide stress-tests and scenario analyses for the prudent aggregation of risks; bringing off-balance sheet activities within the scope of group-wide supervision.

FSA Board publishes report into the failure of the Royal Bank of Scotland
Publication date: 12th December 2011
Publication: UK Financial Service Authority
Author: UK Financial Service Authority
In October 2008, the Royal Bank of Scotland (RBS) failed and had to be part-nationalised.

The UK Financial Services Authority has published a Report into: the causes of the failure of RBS; and deficiencies in, and lessons for, the regulatory framework, supervision and the management of firms. It also explains the decisions reached by the FSA's Enforcement and Financial Crime Division on whether there were grounds for bringing enforcement action for breaches of FSA rules.

Banks' internal audit function - consultative paper issued by the Basel Committee
Publication date: 2nd December 2011
Publication: Basel Committee on Banking Supervision
Author: Basel Committee on Banking Supervision
The Basel Committee on Banking Supervision has issued a consultative paper on the internal audit function in banks.

The objective of the proposed guidance, which revises the Committee's 2001 document Internal Audit in Banks and the Supervisor's Relationship with Auditors, is to help supervisors assess the effectiveness of a bank's internal audit function. The guidance reflects developments in supervisory and banking practices and incorporates lessons drawn from the financial crisis.

The proposed guidance is built around a set of principles that seek to promote a strong internal audit function within banks. The principles cover supervisory expectations related to the internal audit function as well as the supervisory assessment of that function. The principles also review the relationship between a supervisory authority and a bank's internal audit function.

EU proposes criminal sanctions for market abuse on MAD replacement directives
Publication date: 22nd November 2011
Publication: RiskBusiness International
Author: RiskBusiness International
The European Commission is proposing to impose criminal sanctions on individuals and firms guilty of intentional insider dealing and market manipulation. The new Market Abuse Directive (MAD 2), which will replace the current Market Abuse Directive (MAD), aims to introduce a single directly applicable rulebook governing market conduct throughout the EU, which will come into force around 2014.

RiskBusiness November newsletter
Publication date: 22nd November 2011
Publication: RiskBusiness November newsletter
Author: RiskBusiness International

Loss data consortia meet to discuss shared challenges
Publication date: 22nd November 2011
Publication: RiskBusiness International
Author: RiskBusiness International
In late October the British Bankers’ Association (BBA) hosted the Loss Data Consortium Symposium in London. The meeting was invitation only and was attended by the Italian Banking Association’s consortium DIPO, the BBA’s GOLD, ORX, the American Bankers Association, HunOr, DaKOR, DSGV and a representative of the Banking Association for Central and Eastern Europe (BACEE). As well as providing updates on their activities since the last meeting in Rome in 2010, the consortia discussed a wide variety of topics throughout the day from thresholds, data scaling and filtering, levels of granularity in loss event classification and the problems of data anonymity and data quality.

Robo-signers face criminal charges; servicers agree to curb practices
Publication date: 22nd November 2011
Publication: RiskBusiness International
Author: RiskBusiness International
The recent news that two employees of Lender Processing Services have been indicted in Nevada, accused of 606 counts of directing employees to file tens of thousands of false documents, is the first case of criminal charges being filed against the practice of robo-signing (see RiskBusiness FYI - Has Doomsday for the US financial system arrived? for full details of the scandal). Robo-signing has become the common term for the practice of employees signing foreclosure documents without verifying the information and is a defining aspect of the foreclosure scandal that has rocked the US and spawned the US Occupy movement.

RiskBusiness FYI: MF Global – a failure of governance or of regulators?
Publication date: 10th November 2011
Publication: RiskBusiness FYI
Author: RiskBusiness International
The collapse of MF Global brought to light poor corporate governance practices, a basic lack of internal controls and a lack of regulatory supervision. The latest RiskBusiness FYI intelligence report delves into the reasons why the futures and options broker-dealer filed for bankruptcy protection in early November and asks whether this was a failure of internal governance or whether regulators can again be blamed for hastening the collapse of another high-profile financial firm.

October 2011 newsletter
Publication date: 13th October 2011
Publication: RiskBusiness International
Author: RiskBusiness International

European Banking Authority issues Guidelines on Internal Governance
Publication date: 12th October 2011
Publication: RiskBusiness International
Author: RiskBusiness International
The European Banking Authority (EBA) newly-published Guidelines on Internal Governance consolidate existing supervisory guidelines into one document. However some new chapters have been added that deal with the transparency of the corporate structure, the role, tasks and responsibilities of the supervisory function and on IT-systems and business continuity management.

UBS rogue trading event claims two scalps; fate of risk personnel unknown
Publication date: 12th October 2011
Publication: RiskBusiness International
Author: RiskBusiness International
UBS admitted last week that risk systems at the bank did notice suspicious trading activity at the London office but the red flags were not picked up by internal management. Two heads of global equities have resigned and eight more personnel are under investigation.

BPCE learns a lesson on the perils of misstatements
Publication date: 12th October 2011
Publication: RiskBusiness International
Author: RiskBusiness International
Earlier this week Risk.net reported that BPCE, the French co-operative banking group that owns investment bank Natixis, had overstated its derivatives exposure to France by €3.4 billion in data submitted to the European Banking Authority (EBA) for its continent-wide stress tests. Although the error did not affect its stress test, the exposure of such a basic error – especially at such a heightened time of both regulatory and investor scrutiny of banks – suggests a failure of a control in some division of BPCE.

The RiskBusiness Regulator Survey results show some cause for concern
Publication date: 7th October 2011
Publication: RiskBusiness FYI
Author: RiskBusiness International
In July and August 2011, RiskBusiness International undertook an electronic survey amongst risk management professionals working in the global financial services industry to rate their regulator, anonymously, on its performance in several categories relating to operational risk supervision and oversight: Clarity and completeness of regulations; conformance of regulations to Basel II and Solvency II; approachability; detailed knowledge of operational risk management; consistency; level of guidance provided; fairness; degree of home-host regulator interaction; industry discussion and consultation; and staff turnover.

The aim of this Survey was to benchmark market participants’ perspectives on the effectiveness and appropriateness of operational risk regulation. The results were analysed overall, by geographical region and by regulator. Individual regulator results are only available to the relevant regulator.

The results overall, in this time of ongoing global financial and economic uncertainty, are of deep concern for the entire industry.

September 2011 newsletter
Publication date: 22nd September 2011
Publication: RiskBusiness International
Author: RiskBusiness International

Interpretation of FSA Remuneration Code threatens op risk reporting
Publication date: 21st September 2011
Publication: RiskBusiness International
Author: RiskBusiness International
The FSA's Remuneration Code requires firms to restrict unnecessary risk taking by individual employees. One way firms are doing this is by reducing pay/bonuses if the individuals are found to be in breach of risk limits. For market risk and credit risk this is easy to do, however quantifying op risk tolerances for individuals is difficult, if not impossible. Therefore some firms are requiring anyone found to be at fault for an operational risk breach/loss be recorded with a view to being penalised in their remuneration packages. But this is not the only interpretation of the rules.

UBS rogue trading event sparks front-to-back control reviews
Publication date: 21st September 2011
Publication: RiskBusiness International
Author: RiskBusiness International
Kweku Adoboli has succeeded in costing UBS $2.3 billion in a rogue trading incident that bears all the similarities of Jérôme Kerviel’s actions from three years ago. Op risk managers are coming under pressure from senior management to begin front-to-back reviews of all their internal controls to answer that question that always arises after an op risk loss: “Could it happen here?”

RiskBusiness FYI - Insurers are at risk of rogue traders too
Publication date: 20th September 2011
Publication: RiskBusiness FYI
Author: RiskBusiness International
Before risk managers in insurers, hedge funds and pension funds become too smug over yet another rogue trading event in banking, it may be useful to consider – could it happen in one of these kinds of firms too? The latest RiskBusiness FYI publication advices what insurers need to do to ensure it won’t.

Managing operational risk through periods of uncertainty
Publication date: 20th September 2011
Publication: RiskBusiness FYI
Author: RiskBusiness International
Two Greek banks – Eurobank EFG and Alpha Bank – have announced they will merge operations to help them survive the worst economic crisis in the country’s history. Although mergers can provide synergies to increase efficiencies and cut costs, the merger process substantially increases the potential for damaging operational risks to occur.

United Nations issues warning over a major resurgence of the H5N1 Avian Influenza
Publication date: 16th September
Publication: RiskBusiness International
Author: RiskBusiness International
The United Nations has issued an warning over a major resurgence of the H5N1 Highly Pathogenic Avian Influenza through a mutant strain of the virus. The combination of the highly lethal bird flu strain and the highly infectious H1N1 is spreading through Asia. The United Nations Food and Agriculture Organization (FAO) warns the viruses are at their highest levels in 50 years and clinical outbreak of both increase the risk that the two may come into contact with each other more frequently, facilitating the transfer of genomic material to form a hybrid.

Although scientists have played down the risks of the disease spreading to humans, particualry in the western world, it would be advisable for operational risk managers in all industries – especially those located in Asia – to dust off their pandemic flu business continuity plans to ensure they remain up-to-date in advance of any possible outbreak.

Please do not hesitate to contact RiskBusiness International if you require any further information about how avian flu has affected businesses in the past and what firms can do to better prepare.

RiskBusiness FYI - Vickers’ Report fails to achieve ICB’s aims
Publication date: 13th September 2011
Publication: RiskBusiness International
Author: RiskBusiness International
The Final Report by the UK’s Independent Commission on Banking (ICB), chaired by Sir John Vickers, recommends banks ring fence retail banking services and small business lending from global wholesale and investment banking activities.

Although the report makes many sensible findings, its overall conclusion to ring-fence retail operations will not achieve any of the three aims set out by the ICB to: make it easier to resolve failing banks; reduce systemic risk to UK retail banks; or strengthen the UK’s position as a global financial center. More likely, ownership and control structures will become more complex, making it more difficult to resolve failing firms. The UK also faces the very real scenario of one or two very large retail banks that increase the overall systemic risk of the UK financial system. And finally, the UK is not a financial center in retail banking. "Thus, with flawed aims and an overt political agenda, the Final Report will not bring about the kind of real change required, not just in the UK, but in the global financial services industry,” says Mike Finlay, CEO, RiskBusiness International.

The latest RiskBusiness FYI intelligence report digs a little deeper into the details of the Vickers’ Report and assesses its impact from an operational risk management point of view.

Principles for pension scheme operational risk management
Publication date: 31st August 2011
Publication: RiskBusiness International
Author: RiskBusiness International
The UK Pensions Regulator has recently begun to look more closely at risk management and internal controls implemented at pension fund trustees. This new intelligence paper from RiskBusiness International presents a series of principles to help Trustee Boards and scheme sponsors develop a risk management framework with the aim of improving internal controls and to increase their confidence.

EBA launches remuneration benchmarking exercise
Publication date: August 2011
Publication: RiskBusiness International
Author: RiskBusiness International
The European Banking Authority (EBA) has issued two consultation papers regarding remuneration for high earners at European banks.

The first paper concerns a remuneration data collection exercise which is required under the amendments to the Capital Requirement Directive, or CRD III, which came into force on 1 January 2011. The second paper concerns the benchmarking exercise, which the EBA hopes will reveal the evolution of remuneration trends and levels in institutions across the European Union member states.

Policing the accountants
Publication date: August 2011
Publication: RiskBusiness International
Author: RiskBusiness International
Internal fraud is probably one of the most damaging of operational risk events for it impacts not only the loss profile of the firm and its reputation, it also impacts firm-wide morale when a trusted member of the team is discovered with their hand in the till. The most prevalent business line for this type of fraud is the management accounts department.

FSA issues guidance on op risk policies and documents
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RiskBusiness FYI - When the regulators get it wrong
Publication date: August 2011
Publication: RiskBusiness International FYI
Author: RiskBusiness International
The latest RiskBusiness FYI publication, “When the regulators get it wrong”, takes an in-depth look at several bank crises from history including Bank of Credit and Commerce International (BCCI), Barings and Northern Rock and investigates where banking supervisors were found to be at fault either for failing to foresee a problem developing or in the way they handle an incident and/or the aftermath.

Enhancing frameworks in the standardized approach to operational risk - FSA paper
Publication date: 13th July 2011
Publication: FSA
Author: UK Financial Services Authority
The paper follows on the ‘Enhancing frameworks in the standardized approach to operational risk’ guidance note published early 2011.

This new guidance focuses attention on the importance of appropriate operational risk policies and documentation and their management as part of TSA frameworks.

Summary of the key issues

Documentation forms an integral part of managing operational risk and is an important prerequisite to the effective operation of controls.

Consistent with BIPRU 6.4 (TSA requirements for operational risk) referring to sections of the Handbook outside of the operational risk domain (e.g. SYSC), the paper recommends that operational risk functions in firms not only manage documentation they are directly responsible for, but also promote good documentation practices in other functions and business units.

The paper recommends that firms meet the requirement of a ‘use test’ for documentation, i.e. ensure it works thanks to its quality, the fact it is regularly reviewed, communicated, well-understood and actually used by relevant staff. It also needs to evolve with the firm’s business and reflect any changes in the firm’s environment.

Overall, the FSA is not prescriptive in its recommended approach to documentation. However, to help satisfy TSA operational risk requirements, firms could demonstrate:

•they have all their important processes documented to appropriate levels of detail in policies and other documents;
•their documentation is well-managed through the application of the principles of well-defined ownership, documentation hierarchy and lifecycle; and
•they have relevant documentation management controls.

Newsletter July 2011
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Goldman Sachs – a case study in what not to do
Publication date: July 2011
Publication:
Author: RiskBusiness International
Goldman Sachs could once again be facing fraud charges thanks to the findings of an extensive report issued by the US Senate's Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs. Nevertheless, the bank has proven to be remarkably resistant to on-going reputational risk damage and so far retains its position as the leading investment bank.

Regulators move to impose AMA capital floors
Publication date: July 2011
Publication:
Author: RiskBusiness International
In this new world environment of more intense regulatory scrutiny and the trend towards ensuring banks hold more capital as buffers against further shocks to the financial system, imposing capital floors on the AMA capital calculation is gaining ground with national regulators.

RiskBusiness FYI - An Analysis of the Two Final Versions of new Basel Papers
Publication date: 1 July 2011
Publication: RiskBusiness FYI
Author: RiskBusiness International Limited
The Basel Committee on Banking Supervision released the final versions of two papers at the end of June 2011 - Principles for the Sound Management of Operational Risk and Operational Risk - Supervisory Guidelines for the Advanced Measurement Approaches. In this RiskBusiness FYI, the implications and changes from earlier consultative versions of the paper are discussed and described.

Principles for the Sound Management of Operational Risk
Publication date: June 2011
Publication: BIS Publication
Author: Basel Committee on Banking Supervision
Principles for the Sound Management of Operational Risk, which was originally issued in 2003 as Sound Practices for the Management and Supervision of Operational Risk, highlights the evolution of operational risk management over this period. The principles outlined in the report are based on best industry practice and supervisory experience and cover three overarching themes: governance, risk management and disclosure.

A consultative version of this report was issued for public consultation in December 2010. The Committee appreciates the constructive comments received and thanks those who have taken the time and effort to express their views on the consultative document.

Operational Risk - Supervisory Guidelines for the Advanced Measurement Approaches
Publication date: June 2011
Publication: BIS Publication
Author: Basel Committee for Banking Supervision
The regulatory capital adequacy framework envisages that, over time, the operational risk discipline will continue to mature and converge towards a narrower band of effective risk management and measurement practices. The guidance on advanced measurement approaches promotes improvement in this area by setting out supervisory guidelines relating to governance, data and modelling.

A consultative version of this report was issued for public consultation in December 2010. The Committee appreciates the constructive comments received and thanks those who have taken the time and effort to express their views on the consultative document.

Has Doomsday for the US financial system arrived?
Publication date: 20 June 2011
Publication: RiskBusiness FYI
Author: RiskBusiness International Limited
In today’s world of continuing global financial uncertainty, fuelled by the fiscal troubles of Greece, the emerging thirst for democratic government across Northern Africa and parts of the Middle East, natural disasters in Japan, Australia, New Zealand and many other countries, volcanic eruptions causing travel and business disruption in Europe and South America, we can be excused for often missing key indicators of potential approaching problems... and this is why we at RiskBusiness International Limited would like to share with you our latest intelligence on global operational risk-related issues – RiskBusiness FYI.

Even in the RiskBusiness Scenario Service, we could not have predicted the scenario described in the attached intelligence report – an ever evolving chain of buyers and onward sellers of collateralised debt obligations (CDO’s) which now all appear to be built on quicksand – the very fundamental requirements in creating the instruments flawed through simple operational risk – human error, oversight and negligence. And the potential outcome....current holders of these CDO’s may legally have grounds to reclaim their investments from those who sold the investment vehicle to them...who in turn would have a claim against those who they bought it from...and so on...and so on...all the way back to the investment banks who packaged the underlying securities, underwrote the issues and acted as trustees...and they may even have a claim against the mortgage originators, if they failed with the most fundamental task in the entire mortgage-to-securitisation pipeline...ensuring appropriate documentation of the transfer of title.

The US deficit is expected to exceed $1.5 trillion dollars in 2011...at the end of 2010, there was more than $1.7 trillion dollars of CDO’s in issue.... if all of that is built on quicksand, the global financial markets are in for a enormous shock.....

Newsletter June 2011
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Lloyds Banking Group abandons AMA
Publication date: 7th June 2011
Publication: RiskBusiness International newsletter
Author: Victoria Tozer-Pennington
Lloyds Banking Group has opted to return to the standardized approach for operational risk measurement “at its own request”, confirmed a source at the bank.

Identifying boundary risks and underestimating operational risk
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Case study – data breaches
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IOR Key Risk Indicators Sound Practice Guidance Paper
Publication date: 19th November 2010
Publication: Internal Guidance Paper
Author: Institute of Operational Risk
The Institute of Operational Risk has published a Key Risk Indicators Sound Practice Guidance paper to address the lack of written support on the effective application of this important tool.

Covering the whole of the Key Risk Indicators (KRI) process from their selection to their use in risk reporting and assessments, this is the fourth in the Institute's series of sound practice papers designed to provide practical guidance on the implementation of techniques necessary to support a robust operational risk management framework.

The Guidance Paper contains considerable material provided to the Institute of Operational Risk by RiskBusiness International and soruced from the KRI Library (www.KRIeX.org).

2010 FSI Survey on the Implementation of the New Capital Adequacy Framework
Publication date: 23 September 2010
Publication: BIS Occassional Paper No 9
Author: Financial Stability Institute, Bank for International Settlements
Over the past years, the Financial Stability Institute (FSI) has conducted surveys on subjects of supervisory interest and shared the results with the supervisory community. The FSI carried out a survey on Basel II implementation in 2004, followed by updates in 2006, 2008 and 2010.

The 2010 survey was sent to 173 jurisdictions, including members of the Basel Committee on Banking Supervision (BCBS). Responses were received from 133 jurisdictions, representing an overall response rate of 77%.

The 2010 survey results indicate that 112 countries have implemented or are currently planning to implement Basel II, as compared to 106 countries in the 2008 survey. The results of the 2010 survey reinforce the conclusion of the earlier FSI surveys that Basel II will be implemented widely around the world.

Specific details on the take-up by risk type are provided.

Causal Taxonomy: Cause Célèbre
Publication date: June 2009
Publication: OpRisk & Compliance, June 2009, Volume 10 Issue 7
Author: Rick Cech, RiskBusiness International Limited
Causal taxonomy was around in op risk's beginnings but was put aside as the discipline evolved. Now the re-evaluation of op risk prompted by the financial crisis has pushed causal analytics back up the agenda. Rich Cech proposes a potential future role

Scenario Analysis - Which Way Now?
Publication date: April 2009
Publication: OpRisk & Compliance
Author: Tara McLenaghen
Tara McLenaghen discusses how scenario analysis can be used to address some of the risk management failures highlighted by the financial crisis.

KRI Forum 2009 - How the Marriage of External Events and KRIs Can Deliver Extraordinary Value
Publication date: April 22nd 2009
Publication: KRI Forum 2009 - GCOR III
Author: Penny Cagan, Tara McLenaghen

KRI Forum 2009 - Measuring Risk Using KRIs in a Transaction Flow Business
Publication date: April 22nd 2009
Publication: KRI Forum April 2009 - GCOR III
Author: Leslie Wims Morris

KRI Forum 2009 - The (Re-)Emergence of Cause as a Core Theme in Operational Risk
Publication date: April 22nd 2009
Publication: KRI Forum, GCOR III
Author: Carole Carpentier, Rick Cech

KRI Forum 2009 - Building New Standards for the Middle Office
Publication date: April 22nd 2009
Publication: KRI Forum April 2009 - GCOR III
Author: Middle Office Solutions

The 18 best KRIs for retail lending
Publication date: February 2008
Publication: RMA Journal
Author: Tara McLenaghen
The RMA’s Retail Banking KRI Working Group, facilitated and guided by RiskBusiness' Tara McLenaghen, has been teleconferencing monthly with the goal of developing a list of the most valuable key risk indicators for retail’s different risk areas. Participants have found these discussions an excellent way to validate their own KRIs against those of peer institutions. Now, after much research and brainstorming, the group has identified “the 18 best KRIs for retail lending”, as described in this article by Tara.

Chief risk officers at crunch time: Compliance champions or business partners?
Publication date: December 2008
Publication: Journal of Risk Management in Financial Institutions, Vol 2.1
Author: Anette Mikes, Professor of Risk Mangement, Harvard Business School
New regulatory requirements have raised the bar on compliance and significantly expanded the remit of risk management departments in financial institutions. The compliance imperative requires banks to implement a firm-wide risk management framework complete with analytical models for the measurement and control of quantifiable risks. In addition, recent corporate governance guidelines advocate the 'business partner' role of risk management, considering it a high-level strategic activity, contributing to board-level decisions, planning and performance management. Anette Mikes from Harvard Business School, debates the age old issue as to whether risk executives are considered Compliance Champions or Business Partners?

CBA KRI Services Case Study
Publication date: 30 April 2008
Publication: www.KRIeX.org
Author: RMA
Commonwealth Bank of Australia - Kudos to KRI Library Services. The KRI Library has been used broadly across CBA, from training sessions on the purpose and uses of KRIs through to the work shopping of ideas for new KRIs across the Group.

Identifying and Selecting the Right Risk Consultant
Publication date: 16 February 2007
Publication: Forrester Research
Author: Michael Rasmussen
Business today is dynamic and complex, which is causing organizations to consider more formalized processes for enterprise risk management. The goal is to effectively mitigate or avoid damage to the organization while seizing the maximum return on opportunities. To effectively manage risk, organizations turn to risk consultants for advice. This research publications provides information on the kinds of consultants in the risk area.

A change of scene
Publication date: December 2007/January 2008
Publication: Asia Risk
Author: Duncan Woods
Scenario analysis is often used to plug the gaps that conventional data can't fill
when dealing with the tail of loss distributions. But it might have more to offer.

US bank regulators reach agreement on the implementation of the Basel II capital rules
Publication date: 21 July 2007
Publication: The Financial Times
Author: David Wighton
US bank regulators finally reached agreement on Friday on the implementation of the Basel II capital rules, which will bring the regime for large US banks more in line with that already adopted in Europe.
The agreement, which could significantly reduce the amount of capital large banks would be required to hold, ends years of wrangling among the four US regulators that has infuriated large banks and alarmed politicians in the US and exasperated banks and regulators in Europe.

This article can be found here,
also, Federal Reserve press release

Life Insurers: Caught Betweena Rock and a Hard Place
Publication date: November/December 2005
Publication: GARP Risk Review
Author: Peter Kandl
How has the risk landscape recently changed in the European life insurance industry? What are the biggest
risk management challenges facing insurers? And how has the development of Solvency II and other
regulatory frameworks affected insurers? Dr. Peter Kandl examines the evolution of risk management
principles and practices in the European insurance community.

The data puddle challenge
Publication date: August 2007
Publication: Oprisk & Compliance
Author: Tara McLenaghen
The loss event taxonomies currently in use are inadequate. The worst problem is the lack of clarity with regard to the boundary conditions between risk event categories. Tara McLenaghen explores the issues.

Event Horizon (Portuguese) - "Eventos Tipo"
Publication date: February 2007
Publication: OpRisk and Compliance
Author: Rick Cech, RiskBusiness
A Portuguese translation of an article on event types, event horizons and the need for a clear and concise data classification taxonomy.

Event Horizon
Publication date: February 2007
Publication: Op Risk and Compliance
Author: Rick Cech, RiskBusiness
Rick Cech takes a second look at what makes up operational risk event types, and asks if there is a more advanced way to define them.

Proposed Product Reclassification for the KRI Framework
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KRI Services Team 2006 Achievements
Publication date: January 2007
Publication: KRIeX
Author: Leslie Mitchell
As we look back over 2006, two themes emerge from KRI Services activities. Our efforts revolved around enhancing programs and on expanding product reach for both Library and Benchmarking Services.

Summary of Discussions of the
Publication date: June 2006
Publication: BoJ Report
Author: Bank of Japan
A report on a series of discussions hosted by the Bank of Japan amongst leading Japanese financial institutions on different approaches and benefits to managing operationa risk.

The Trouble With KRIs
Publication date: May 2006
Publication: Oprisk & Compliance
Author: Dianne See Morrison
KRIs are often considered hard to deal with, but op risk managers aren't dismissing them just yet.

Composite Indicators: Reporting KRIs to Senior Management
Publication date: April 2006
Publication: RMA Journal
Author: Charles Taylor
Figuring out what—and how much—information to report to senior management is a tough problem. Trying to relate disparate types of information—combining apples and oranges—makes it even worse. This article discusses a solution: composite indicators. The author explains the concept with plain words, illustrative graphics, and the occasional equation.

Industry Sound Practices for Financial and Accounting Controls at Financial Institutions
Publication date: April 2006
Publication: RMA Journal
Author: John E. Tschirhart and Roseanne T. Farley
After a two-year review of financial and accounting controls at a number of large, complex banking institutions, the Federal Reserve Bank of New York identified 11 sound practices that may be useful to institutions seeking to enhance their financial control environment.

Composite Indicators:Reporting KRIs to Senior Management
Publication date: April 2006
Publication: RMA Journal
Author: Charles Taylor
Figuring out what—and how much—information to report to senior management is a tough problem. Trying to relate disparate types of information—combining apples and oranges—makes it even worse. While much has been written on the problem, this article talks about a solution: composite indicators. The author explains the concept with plain words, illustrative graphics, and the occasional equation.

KRI Services Update 2006
Publication date: January 2006
Publication: KRIeX
Author: Leslie Mitchell
As 2006 begins, we’d like to summarize our plans for KRI Library and Benchmarking Services. This letter incorporates and adds to our November 2005 KRI Services Newsletter which is available online at www.KRIeX.org and provides valuable information on subscription renewals, working groups, risk mapping and more.

Implementing Composite Indicators
Publication date: January 2006
Publication: KRIeX
Author: Charles Taylor
The presentation and related tool, initially provided to participants in the January 2006 KRI Conference, is available to all KRI Subscribers. Click on the link(s) below and learn more about:
* extracting value from your operational risk database
* identifying factors that compound one another's impact on risk
* combining data to produce more insightful analysis
* generating sophisticated, cross-enterprise reports for senior management

New York Scenario Workshop Synopsis
Publication date: 28 October 2005
Publication: RiskBusiness Workshop Synopsis
Author: Tara McLenaghen, RiskBusiness
A synopsis of discussion at the recent scenario workshop hosted by RiskBusiness in New York

Scenario Presentation from JP Morgan Chase & Co
Publication date: October 2005
Publication: RiskBusiness Workshop
Author: Robin Phillips, JP Morgan Chase & Co
A copy of a presentation by Robin Phillips of JP Morgan Chase at the New York RiskBusiness Scenario Workshop

Scenario Presentation from Man Group
Publication date: October 2005
Publication: RiskBusiness Workshop
Author: Jonathan Howitt, Man Group
A copy of a presentation by Jonathan Howitt of Man Group at the New York RiskBusiness Scenario Workshop

Scenario Presentation from AXA UK
Publication date: October 2005
Publication: RiskBusiness Workshop Synopsis
Author: James Ryan, AXA UK
A copy of a presentation by James Ryan of AXA UK at the RiskBusiness Scenario Workshops in both London and New York.

Scenario Presentation from RiskBusiness
Publication date: October 2005
Publication: RiskBusiness Workshop Synopsis
Author: Jonathan Davies, RiskBusiness
A copy of a presentation by Jonathan Davies of RiskBusiness at the RiskBusiness Scenario Workshops in London and New York.

Corporate Governance Discussion Paper Response
Publication date: 17 October 2005
Publication: RiskBusiness Document
Author: Mike Finlay
A response by RiskBusiness to the Consultative Document Enhancing Corporate Governance for Banking Organizations issued by the Bank for International Settlements for industry comment

KRI Survey Report
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Scenario analysis: the way forward
Publication date: September 2005
Publication: Operational Risk
Author: Duncan Wood, Operational Risk
An article looking at how scenario analysis is only recently becoming seen as an important input for Basel II AMA

Next Stop - Benchmarking
Publication date: September 2005
Publication: Global Risk Regulator
Author: Editorial
An article examining the potential for benchmarking KRIs, following the publication of the KRI Banking Study report.

Putting KRIs into Context
Publication date: July 2005
Publication: RiskBusiness Briefing
Author: Mike Finlay, RiskBusiness
This article explores the inter-relationships between the various forms of operational risk management tools, using the analogy of a long journey to fit each tool or approach into its relevant context from a management perspective.

Scenario Analysis Workstream from RiskBusiness
Publication date: August 2005
Publication: Operational Risk
Author: Editorial
A report on the recent scenario analysis workshop hosted by RiskBusiness in London.

Is There only 1 Unexpected Loss?
Publication date: August 2005
Publication: RMA Journal
Author: Jonathan Davies
Before we can manage operational risk effectively, we need to know the right questions to ask. Besides the need to identify the specific risk exposure, we must determine 1) whether we’re talking about residual or inherent risk; 2) the contributing elements; and 3) the required confidence level and time horizon. It is the third point, often overlooked, that is the focus of this article.

KRIs In Context
Publication date: August 2005
Publication: RiskBusiness
Author: Mike Finlay
Operational Risk Management – A Long Journey. Putting the use of KRIs into context against other operational risk tools…

Scenario Presentation from CSFB
Publication date: July 2005
Publication: RiskBusiness Workshop Synopsis
Author: James Elder, CSFB
A copy of a presentation by James Elder of CSFB at the RiskBusiness Scenario Workshop in London.

Scenario Presentation from Man Group
Publication date: July 2005
Publication: RiskBusiness Workshop Synopsis
Author: Jonathan Howitt, Man Group
A copy of a presentation by Jonathan Howitt of Man Group at the RiskBusiness Scenario Workshop in London.

London Scenario Workshop Synopsis
Publication date: July 2005
Publication: RiskBusiness Workshop Synopsis
Author: Editorial
A synopsis of discussion at the recent scenario workshop hosted by RiskBusiness in London

KRI Banking Study Report
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KRIs under scrutiny at OpRisk Europe conference
Publication date: April 2005
Publication: Operational Risk
Author: Editorial
Article describes some of the issues around KRIs discussed at the OpRisk Europe conference.

Op Risk Management and Basel II
Publication date: March 2005
Publication: @IBBM
Author: Hansruedi Schütter
Exploring the apparent different angles presented by Basel II capital adequacy requirements and the need to managed operational risks to minimize losses, including the role of KRIs

KRIs: the op risk early warning system
Publication date: January 2005
Publication: Operational Risk
Author: Duncan Wood, Operational Risk
Although there are a few obstacles to overcome before key risk indicators finally gain full industry acceptance, interest in KRIs is only set to rise.

Progress report due on KRI project
Publication date: January 2005
Publication: Operational Risk
Author: Editorial
The co-ordinators of the industry’s Key Risk Indicator (KRI) project were preparing to give a progress report to participants at a conference in New
York as Operational Risk magazine went to press.

Key Risk Indicators Move Up A Gear
Publication date: November 2004
Publication: Global Risk Regulator
Author: Editorial
KRIs sound fine in principle, but do they work in practice? An expanded indicators library, with fifty participating banks, will provide the test. A similar project for insurers is likely soon.

Software vendors aim to incorporate KRIs
Publication date: November 2004
Publication: Operational Risk
Author: Editorial
Article describes the operational risk vendor summit held in London and the outline of how software vendors would be expected to incorporate support for standardized industry indicators into their products.

Trying to dodge the new product pineapple
Publication date: September 2004
Publication: Operational Risk
Author: Ellen Leander, Operational Risk
Banking regulators' proposed rules for new product approval processes will require firm-wide 'know your customer' frameworks. Not surprisingly, banks have criticised the proposals.

A structured framework for KRIs
Publication date: July 2004
Publication: Operational Risk
Author: Mike Finlay, RiskBusiness
London-based RiskBusiness International and the US’s Risk Management Association have come together to create the KRI Study, KRI Library and KRI Exchange as a means for financial services firms to take advantage of key risk indicators (KRIs). RiskBusiness’ Mike Finlay outlines the main objectives and benefits of this joint initiative.

Bank KRI study to take off
Publication date: July 2004
Publication: Operational Risk
Author: Editorial
Alongside the study of key risk indictors (KRIs) at banks being conducted by Pennsylvania-based Risk Management Association and London-based consulting firm RiskBusiness, a similar program is to be launched
for insurance companies.

The economics of a pandemic
Publication date: July 2004
Publication: Operational Risk
Author: Oonagh Leighton, Operational Risk
The HIV/Aids pandemic is the world’s greatest public health disaster. Oonagh Leighton examines its impact on financial institutions, including the growth of risk strategies to manage this evolving challenge.

RiskBusiness Comment On Basel II
Publication date: June 2004
Publication: RiskBusiness
Author: RiskBusiness
RiskBusiness Comment On Basel II

A Difference in Kind
Publication date: June 2004
Publication: Risk
Author: David Rowe, SunGard
Tracking key risk indicators is emerging as a central aspect of best practice for operational risk management. Defining these indicators and establishing benchmarks for them, however, is a complex task.

Comment : International Convergence of Capital Measurement and Capital Standards
Publication date: June 2004
Publication: RiskBusiness Briefing
Author: RiskBusiness
Comparative document produced by RiskBusiness for the industry highlighting the key differences between the final published version of Basel II and previous drafts.

Key Risk Indicator project progressing
Publication date: May 2004
Publication: Operational Risk
Author: Editorial
The Key Risk Indicator (KRI) project which the US-based Risk Management Association is conducing jointly with UK consultants RiskBusiness is continuing to make progress, says Mike Finlay, a principal at RiskBusiness.

Marionettes, Masters of the Universe? Or The Human Factor in Operational Risk
Publication date: May 2004
Publication: RMA Journal
Author: Jonathan Howitt, Man Group, Michael Mainelli, Z/Yen, and Charles Taylor, RMA
Understanding the drivers of human behavior will help us manage risks better. People, after all, design the processes, build and implement the systems, and put in place the organizational structures that lead to risk taking. People engineer the products, establish networks of suppliers, and solicit the clients. Even when acts of God disrupt our affairs, people make the judgments and
take the emergency actions that shape the outcome. Put very simply: We
assume risk to make money and deliver value. Operational risk is our own
creation. The implication is equally simple—when things go wrong, we have only ourselves to blame. Our misunderstanding, miscommunication, or, worse, our own misconduct cause failure. Understanding ourselves, both as individuals and as organizational people, is where we need to start.

Perspectives on Operational Risk
Publication date: May 2004
Publication: RMA Journal
Author: Charles Taylor
The introduction to the May 2004 Special Edition on Operational Risk of the RMA Journal, where Taylor provides some different views.

KRI VaR
Publication date: May 2004
Publication: RMA Journal
Author: Tim Shepheard-Walwyn
Lessons from manufacturing for the financial services industry.

A Structured Approach to Building Predicitive KRIs
Publication date: May 2004
Publication: RMA Journal
Author: Aravind Immaneni, Chris Mastro and Michael Haubenstock
Leading indicators with good predictive capabilities are critical to the successful management of enterprise risk. This article describes how a process that incorporates some Six Sigma methods for developing and using key risk indicators was used at Capital One.

Getting Traction with KRIs: Laying the Groundwork
Publication date: November 2003
Publication: RMA Journal
Author: Charles Taylor, RMA and Jonathan Davies, RiskBusiness
This article summarizes insights on the incidence of operational risk gleaned from Part I of the KRI Framework Study and discusses the direction of future work.

Building Effective Indicators to Monitor Operational Risk
Publication date: May 2002
Publication: RMA Journal
Author: Jonathan Davies, RiskBusiness and Michael Haubenstock, CaptialOne
Indicators are the measures used to monitor and predict operational events. They complement the self-assessment process to continually monitor the effectiveness of controls. Use them with escalation criteria to keep management informed of emerging issues.

RiskBusiness January 2012 newsletter
Publication date: 19th January 2012
Publication: RiskBusiness International
Author: RiskBusiness International