Thesis (M.Com. (Risk Management))--North-West University, Potchefstroom Campus, 2009.

One of the biggest problems South African banks are experiencing when managing operational risk is the lack of a single definition for operational risk. Operational risk can take many forms; for example computer system failure, the malfunction of an ATM or in same instances the long queues at a bank can be an operational risk It is clear that banks lack sufficient information to distinguish between different operational risk events as well as other risk events like credit risk, market risk, etc. In other words, banks are experiencing great difficulties with the identification of operational risk in South Africa The study therefore aims to determine and construct a single definition of operational risk that will be sufficient for the assessment of operational risk management in South Africa. The study also aims to examine the existing as well as the possible methods to identify, quantify and measure operational risk The main goal of this study is therefore to investigate the feasibility of capital provisions as a way of managing operational risk in South African banks, in other words the viability of the New Basel Capital Accord on South African banks. The methodology used includes a literature review, in-depth interviews and a case study on South African Retail Bank to determine and evaluate some of the most renowned indicators of operational risk in South Africa. The first objective was to determine a single definition of operational risk in South Africa. As mentioned, South African banks are having great difficulties to find a single definition of operational risk and this is causing problems in identifying operational risks in South Africa. It is the view of this study that the Basel Committee's definition is not sufficient enough for operational risk management in South Africa; therefore there is a great need to find a single definition of operational risk in South African banks. The second objective is to provide an overview of the Base1 Committee and its Capital Accord, by focusing on one of the outstanding changes to the existing accord, which is the proposed explicit capital requirement for operational risk. It has been established that the Base1 Capital Accord is widely adopted around the world. Consequently, from the viewpoint of being competitive, it is to the advantage of a bank to adhere to the prescriptions of the Base1 Capital Accord. However, to stay relevant, the Basel Capital Accord was due for a review. The Basel Committee released a proposal to replace the existing Basel Capital Accord with a more. risk sensitive framework. The new framework intends to improve safety and soundness in the financial system by placing more emphasis on banks' own internal control and management, the supervisory review process, and market discipline. The third objective of this research was to present the theory of asset and liability management (ALM) within the unifying theme of operational risk management. It was indicated that capital is used to absorb an operational risk loss. The Asset and Liability Committee (ALCO) is responsible for the strategic management of a bank's balance sheet, therefore also ALM, and as capital forms part of the banks balance sheet, it is also the responsibility of the ALCO to manage the capital that is used as provision for an operational risk. The fourth objective was to determine and evaluate the key risk indicators of operational risk in South Africa theoretically and then also by means of a case study on a South African Retail Bank and then to made some recommendations regarding the effective identification of the key indicators of operational risk in South Africa. It was indicated the challenge in identifying key operational risk indicators is to find indicators that is not only business-specific but are also fm wide indicators of operational risk. Recommendations on the effective identification of key operational risk indicators were made. / Thesis (M.Com. (Economics))--North-West University, Potchefstroom Campus, 2004.

One of the biggest problems South African banks are experiencing when managing operational risk is the lack of a single definition for operational risk. Operational risk can take many forms; for example computer system failure, the malfunction of an ATM or in same instances the long queues at a bank can be an operational risk It is clear that banks lack sufficient information to distinguish between different operational risk events as well as other risk events like credit risk, market risk, etc. In other words, banks are experiencing great difficulties with the identification of operational risk in South Africa The study therefore aims to determine and construct a single definition of operational risk that will be sufficient for the assessment of operational risk management in South Africa. The study also aims to examine the existing as well as the possible methods to identify, quantify and measure operational risk The main goal of this study is therefore to investigate the feasibility of capital provisions as a way of managing operational risk in South African banks, in other words the viability of the New Basel Capital Accord on South African banks. The methodology used includes a literature review, in-depth interviews and a case study on South African Retail Bank to determine and evaluate some of the most renowned indicators of operational risk in South Africa. The first objective was to determine a single definition of operational risk in South Africa. As mentioned, South African banks are having great difficulties to find a single definition of operational risk and this is causing problems in identifying operational risks in South Africa. It is the view of this study that the Basel Committee's definition is not sufficient enough for operational risk management in South Africa; therefore there is a great need to find a single definition of operational risk in South African banks. The second objective is to provide an overview of the Base1 Committee and its Capital Accord, by focusing on one of the outstanding changes to the existing accord, which is the proposed explicit capital requirement for operational risk. It has been established that the Base1 Capital Accord is widely adopted around the world. Consequently, from the viewpoint of being competitive, it is to the advantage of a bank to adhere to the prescriptions of the Base1 Capital Accord. However, to stay relevant, the Basel Capital Accord was due for a review. The Basel Committee released a proposal to replace the existing Basel Capital Accord with a more. risk sensitive framework. The new framework intends to improve safety and soundness in the financial system by placing more emphasis on banks' own internal control and management, the supervisory review process, and market discipline. The third objective of this research was to present the theory of asset and liability management (ALM) within the unifying theme of operational risk management. It was indicated that capital is used to absorb an operational risk loss. The Asset and Liability Committee (ALCO) is responsible for the strategic management of a bank's balance sheet, therefore also ALM, and as capital forms part of the banks balance sheet, it is also the responsibility of the ALCO to manage the capital that is used as provision for an operational risk. The fourth objective was to determine and evaluate the key risk indicators of operational risk in South Africa theoretically and then also by means of a case study on a South African Retail Bank and then to made some recommendations regarding the effective identification of the key indicators of operational risk in South Africa. It was indicated the challenge in identifying key operational risk indicators is to find indicators that is not only business-specific but are also fm wide indicators of operational risk. Recommendations on the effective identification of key operational risk indicators were made. / Thesis (M.Com. (Economics))--North-West University, Potchefstroom Campus, 2004.

In the last decade, the financial service industry has become increasingly aware of the dangers posed by operational risk. Profound changes in the economic and financial environment have made it necessary for banks in general to adapt their long term strategies as well as their approaches to the management of their assets and liabilities. Regardless of this heightened awareness, banks continue to fail at effective management of these risks. The Asset and Liability Management Committee (ALCO) is responsible for managing a bank's assets and liabilities to balance its many risk exposures and thereby help it achieve its operating objectives e.g. maximising Net Interest Income (Nil). Thus the ALCO process is the crux of the strategic management process performed within a bank. The ALCO process is driven by people, processes and technology which, in essence, is a broad definition of operational risk. Failure in any one of these areas will lead to failure of the ALCO, ALCO processes and, therefore, the strategic Asset and Liability Management (ALM). The focus of this study is, therefore, how to measure and manage operational risk in a bank's ALCO process. A case study was conducted, with the aid of ALCO experts in a specialised niche bank in South Africa, to identify operational risks within this bank's ALCO process. The various risk indicators of operational risk were classified into 5 broad categories. Each category was weighted according to its representative risk indicator and converted into percentages for the interpretation of the overall results. Category 2 (authority levels) has the highest negative impact, while the remaining 4 categories (employee, model, system and other indicators) have a medium negative impact, on the efficiency of the ALCO process. / Thesis (M.Com. (Risk Management))--North-West University, Potchefstroom Campus, 2009.

In the last decade, the financial service industry has become increasingly aware of the dangers posed by operational risk. Profound changes in the economic and financial environment have made it necessary for banks in general to adapt their long term strategies as well as their approaches to the management of their assets and liabilities. Regardless of this heightened awareness, banks continue to fail at effective management of these risks. The Asset and Liability Management Committee (ALCO) is responsible for managing a bank's assets and liabilities to balance its many risk exposures and thereby help it achieve its operating objectives e.g. maximising Net Interest Income (Nil). Thus the ALCO process is the crux of the strategic management process performed within a bank. The ALCO process is driven by people, processes and technology which, in essence, is a broad definition of operational risk. Failure in any one of these areas will lead to failure of the ALCO, ALCO processes and, therefore, the strategic Asset and Liability Management (ALM). The focus of this study is, therefore, how to measure and manage operational risk in a bank's ALCO process. A case study was conducted, with the aid of ALCO experts in a specialised niche bank in South Africa, to identify operational risks within this bank's ALCO process. The various risk indicators of operational risk were classified into 5 broad categories. Each category was weighted according to its representative risk indicator and converted into percentages for the interpretation of the overall results. Category 2 (authority levels) has the highest negative impact, while the remaining 4 categories (employee, model, system and other indicators) have a medium negative impact, on the efficiency of the ALCO process. / Thesis (M.Com. (Risk Management))--North-West University, Potchefstroom Campus, 2009.

Oil/gas and petrochemical plants are complicated and dynamic in nature. Dynamic characteristics include ageing of equipment/components, season changes, stochastic processes, operator response times, inspection and testing time intervals, sequential dependencies of equipment/components and timing of safety system operations, all of which are time dependent criteria that can influence dynamic processes. The conventional risk assessment methodologies can quantify dynamic changes in processes with limited capacity. Therefore, it is important to develop method that can address time-dependent effects. The primary objective of this study is to propose a risk assessment methodology for dynamic systems. In this study, a new technique for dynamic operational risk assessment is developed based on the Bayesian networks, a structure optimal suitable to organize cause-effect relations. The Bayesian network graphically describes the dependencies of variables and the dynamic Bayesian network capture change of variables over time. This study proposes to develop dynamic fault tree for a chemical process system/sub-system and then to map it in Bayesian network so that the developed method can capture dynamic operational changes in process due to sequential dependency of one equipment/component on others. The developed Bayesian network is then extended to the dynamic Bayesian network to demonstrate dynamic operational risk assessment. A case study on a holdup tank problem is provided to illustrate the application of the method. A dryout scenario in the tank is quantified. It has been observed that the developed method is able to provide updated probability different equipment/component failure with time incorporating the sequential dependencies of event occurrence. Another objective of this study is to show parallelism of Bayesian network with other available risk assessment methods such as event tree, HAZOP, FMEA. In this research, an event tree mapping procedure in Bayesian network is described. A case study on a chemical reactor system is provided to illustrate the mapping procedure and to identify factors that have significant influence on an event occurrence. Therefore, this study provides a method for dynamic operational risk assessment capable of providing updated probability of event occurrences considering sequential dependencies with time and a model for mapping event tree in Bayesian network.

Summaries in English, Afrikaans and Zulu / The significance for a bank to determine its risk appetite has become crucial over the years, based on past and recent risk events in the financial services sector. Regulatory pressure, a focus on corporate governance and risk management have been stimuli for many changes in the financial industry. An example is the need to establish an operational risk appetite framework. It is against this background that the study aimed to identify guiding principles for an operational risk appetite framework that can be used to determine the operational risk appetite of a bank. The study entailed a literature review and an empirical analysis of the principles for an operational risk appetite framework for the banking industry of South Africa. A survey was used to collate the data. Also, the researcher endeavoured to establish a gap between the principles and the current status of implementation of the confirmed principles. The descriptive and inferential results indicated that most of the identified principles were viewed as important and crucial for an operational risk appetite framework for a South African bank, although some were not yet fully implemented. The study also confirmed the principles for an effective operational risk appetite framework to comply with regulatory requirements and to ensure a sound risk management process to support the achievement of business objectives. / Dat 'n bank in staat is om sy risikoaptyt in die finansiëledienstesektor vas te stel, is betekenisvol en dit het oor jare heen vanweë vorige en onlangse risikogebeurtenisse van kritieke belang geword. Die druk van regulering, 'n fokus op korporatiewe bestuur en risikobestuur is stimuli vir talle veranderinge in die finansiële bedryf. 'n Voorbeeld hiervan is die noodsaaklikheid daarvan om 'n operasionele risikoaptytraamwerk op te stel. Teen hierdie agtergrond het die studie beoog om riglyne te identifiseer vir 'n operasionele risikoaptytraamwerk wat gebruik kan word om 'n bank se operasionele risikoaptyt te bepaal. Die studie omvat ’n literatuuroorsig en ’n empiriese ontleding van die beginsels van ’n operasionele risikoaptytraamwerk vir die bankbedryf in Suid-Afrika. ’n Opname is gebruik om die ingesamelde data te vergelyk, en die navorser het gepoog om ’n leemte tussen die beginsels en die huidige stand van implementering van die bevestigde beginsels uit te wys. In die beskrywende en inferensiële resultate word aangedui dat die meeste van die geïdentifiseerde beginsels beskou word as belangrik en kritiek vir ’n operasionele risikoaptytraamwerk vir ’n Suid-Afrikaanse bank, al word sommige beginsels nog nie ten volle geïmplementeer nie. Die studie bevestig die beginsels van ’n effektiewe operasionele risikoaptytraamwerk met die oog daarop om aan reguleringsvereistes te voldoen en ’n deurdagte risikobestuursproses te verseker en sodoende die verwesenliking van sakedoelwitte te ondersteun. / Ngokuhamba kweminyaka kuya kubaluleka kakhulu ukuba ibhanki iwujonge ngononophelo umngcipheko enokuwuthatha, ngenxa yokubona iziganeko zomngcipheko ezenzekileyo kwicandelo leenkonzo zoqoqosho. Uxinzelelo lolawulo, ugxininiso kulawulo lweenkampani kunye nolawulo lomngcipheko zizinto eziphembelele iinguqu ezininzi kurhwebo lokwenza imali. Umzekelo sisidingo sokuseka uphahla lokusebenza ngomngcipheko. Zezi zinto ezibangela ukuba esi sifundo sijolise ekufumaniseni iinqobo ezisisikhokelo sokuqwalasela umngcipheko onokuthathwa, nesinokusetyenziselwa ukulinganisela umngcipheko onokuthathwa yibhanki. Esi sifundo siphengulule uluncwadi olukhoyo ngalo mbandela kunye nohlalutyo olunobungqina lweenqobo ezinokusetyenziselwa ukulinganisela umngcipheko onokuthathwa licandelo leebhanki zoMzantsi Afrika. Kwenziwa uhlolo zimvo ekuqokeleleni iinkcukacha zolwazi. Umphandi wabuya wazama ukubonisa umahluko phakathi kweenqobo ezimiselweyo nemeko ekuyiyo ekusetyenzisweni kweenqobo ezivunyiweyo. Iziphumo ezichazayo nezicingelwayo zibonise ukuba uninzi lweenqobo zibonwa njengamanqaku abalulekileyo nangundoqo okwenza uphahla lokusebenza ngomngcipheko onokuthathwa yibhanki eMzantsi Afrika, nangona ezinye zingekasetyenziswa ngokupheleleyo. Esi sifundo siphinde sangqinisisa iinqobo zophahla olululo lokusebenza ngomngcipheko onokuthathwa ezimele ukuthobela imigaqo elawulayo nokuqinisekisa inkqubo yomgcipheko eqinileyo yokuxhasa ukufunyanwa kweenjongo zoshishino. / Business Management / M. Com. (Business Management)

This research shed the light on regulations and their effects on operational risk management within the Swedish Swedish Banking Sector. The focus lies on operational risk management due to the introduction of new regulations such as FFFS 2014:1, FFFS 2014:4 and FFFS 2014:5. What could be found in the empirical analysis is that the regulations affected organizational changes.  Additionally, differences between large and small banks could be seen. All changes in terms of implementation of regulations are strongly performed throughout the Three Lines of Defence model where clear organization structure and work description are of importance. The Three Lines of Defence is tightly combined with the COSO framework and operational risk management to conduct compliant organization that is adaptable for any regulatory changes.

風險管理為辨識、衡量、監控、及控制風險的過程，本研究除了對於這四項作業風險管理的核心內容予以逐項探討外，另分析近年來國內外作業風險個案發生的原因，介紹巴塞爾銀行監理委員會與先進國家的作業風險監理指南，及作業風險管理實務調查報告並進行分析。 作業風險的特徵為分布範圍很廣、類型多樣化、難以預測、且可能造成銀行重大損失。國內外曾發生的作業風險個案顯示，作業風險的重要性不亞於市場及信用風險，銀行應積極強化作業風險管理，透過落實公司治理與內部控制的執行，將有助於降低作業風險，建立作業風險損失資料庫將是量化作業風險所不可或缺的。國際的作業風險管理趨勢顯示，雖然目前各國對於作業風險的管理已有進展，但仍不及其他領域的風險管理成熟。銀行應建立作業風險管理架構，成立專責部門負責作業風險管理，量化作業風險為目前國外大型銀行的趨勢，惟尚未出現一些標準的模型；結合使用質化與量化風險評估工具可達較佳的管理效果，高階管理人員積極參與及支持作業風險管理活動，經由調整銀行風險文化及創造適當的誘因以執行風險控制策略，則為有效管理作業風險的關鍵。 在作業風險的管理策略方面，對於無法控制或部分可控的風險，實務上可採行保險、委外、透過資本市場等方式來移轉風險，或是以緊急應變及持續營運計畫來降低作業風險所帶來的衝擊。先進國家的監理機關及銀行，無論在作業風險管理上的經驗、方法、及技術，均明顯較我國進步。由於各國的經濟金融情況不同，不同銀行間也有明顯的差異，在參考先進國家的做法時，監理機關及銀行仍應根據我國的實際情況加以調整，重點在於銀行應在成本—效益的考量下，視金融機構的營運規模、業務性質、及風險概況發展適合本身的作業風險管理制度。 / Risk management is a process of indentify, assess, monitor and control/mitigate of risks. The study discuss these four core elements in operational risk management. Analysing the reason of operational risk management failure by introducing the loss events in which domestic and overseas financial institutions. Besides, in order to assist financial institutions in understanding the international trends in reinforcing operational risk management. The study introduce the papers of survey of industry practice in the management operational risk and the supervision guideline for operational risk management in the USA, the UK, Japan, and Hong Kong. Operational risks is everywhere in the business environment. As such, they will vary significantly from organization to organization. The most important types of operational risk involve breakdowns in internal controls and corporate governance. The loss event database is the most helpful tool. In general, qualitative assessment is simpler but no use for capital allocation. The best results have been obtained in applying both qualitative and quantitative techniques. Operational risk management must have the support and involvement of senior managers. They can send the message that operational risks are important, that they deserve attention, and management will allocate resources accordingly. In addition, a separate head office operational risk function has emerged, responsible for developing the operational risk management framework, consolidating information, consulting with the business units, and monitoring the enterprise-wide effectiveness of operational risk management. The risk management strategies execute to uncontrollable or part of controllable risks, except use risk capital to retain some amount of risk, some way for transferring risk involve hedging, insurance, outsouring, use financial derivatives to offset losses. Contingency planning aims to prevent a business disaster from occurring when a very rare event strikes the institution. It should be noted that risk profiles vary among financial institutions, indicating that the most effective method of risk management also may differ among institutions. Financial institution should endeavor to develop operational risk management system after considering its cost-benefit according to their own scale, nature, and risk profile.

Devido à grande volatilidade e ao dinamismo do mercado financeiro, a gestão do risco operacional é fator preponderante para a sobrevivência de qualquer negócio. A lógica existente na disciplina de mercado pressupõe que este possui mecanismos coercitivos de maneira a induzir os gestores a administrar prudentemente os negócios. Ou seja, a sua eficiência depende da atuação ativa dos participantes do mercado no sentido de beneficiar ou recompensar as instituições mais bem geridas e penalizar as empresas mal administradas. Tradicionalmente, os bancos divulgam dados acerca das exposições ao risco de crédito e de mercado, a fim de auxiliar a compreensão do seu perfil de risco. Entretanto, também estão expostos a outros tipos de riscos, tais como o risco operacional, o qual pode prejudicar significativamente o desempenho futuro, podendo levá-los até a falência. Logo, verifica-se a importância da divulgação dessas informações para a disciplina de mercado. Buscando proteger o sistema financeiro dos resultados negativos advindos dos riscos inerentes às suas atividades, o Comitê da Basiléia publicou o Novo Acordo de Capital, previsto para entrar em vigor no final de 2006, sendo que nesta data as instituições financeiras deverão obedecer a certos padrões mínimos no gerenciamento de seus riscos, entre eles o operacional. Esta dissertação tem por objetivo analisar a avaliação e gerenciamento do risco operacional em uma instituição financeira nacional de grande porte, detectando instrumento de medida e análise e o estágio de desenvolvimento quanto ao gerenciamento do risco operacional. Para tanto, utilizou-se a metodologia de Estudo de Caso e as evidências foram obtidas por documentação, registros em arquivos, entrevistas e observação direta. Os resultados sugerem que o banco pesquisado encontra-se em estágio intermediário na administração dos riscos operacionais, contudo, está desenvolvendo técnicas e processos tanto para se adequar às exigências dos órgãos supervisores, quanto para a melhoria de seus resultados. / Due to the great volatility and to the dynamism of the finance market, the management of the operational risk is a preponderant factor for the survival of any business. The logic that is in the market discipline, implies that it has coercive mechanisms that induces the managers to manage carefully theirs business. In other words, the efficiency depends on the active performance of the participants of the market, on the sense of benefiting or to reward the institutions that are good managed and to penalize the bad managed one. Traditionally, the banks give data concerning the exposure to the credit market risks, in order to assist the comprehension of their risk profile. However, they are also exposed to other kinds of risks, such as the operational risk, which can injure significantly the future performance and could even conduct them to the bankruptcy. Soon, they can verify the importance of the divulgation of these information for the market discipline. Seeking to protect the financial system from negative results of the inherent risks to its activities, Basel Committee published the New Capital Accord, foreseen to go into effect at the end of 2006, and in this date the financial institutions should obey some minimum standards in the management of their risks, among them the operational. The goal of this dissertation is to analyze the evaluation and management of the operational risk in large financial institution, detecting measure and analysis instrument and the stage of development regarding the management of the operational risk. For that, the methodology of Study of Case was used and the evidences were obtained by documentation, records in files, interviews and direct observation. The results suggest that the searched bank is on an intermediary stage in the administration of the operational risks, however, it is developing techniques and processes to adapt to the supervisors\' demanding and to the improvement of its results.