Ten laws of operational risk : understanding its behaviours to improve its management / Michael Grimwade.
By: Grimwade, Michael [author.]
Language: English Publisher: Hoboken, NJ : Wiley, [2022]Description: 1 online resourceContent type: text Media type: computer Carrier type: online resourceISBN: 9781119841357; 9781119841371; 9781119841388; 9781119841364Subject(s): Operational risk | Risk managementGenre/Form: Electronic books.DDC classification: 658.15/5 LOC classification: HD61Online resources: Full text is available at Wiley Online Library Click here to viewItem type | Current location | Home library | Call number | Status | Date due | Barcode | Item holds |
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COLLEGE LIBRARY | COLLEGE LIBRARY | 658.155 G8845 2021 (Browse shelf) | Available | CL-52967 |
ABOUT THE AUTHOR
Michael Grimwade (London, UK) has worked in Operational Risk Management for over 25 years. He is Head of Operational Risk for Industrial and Commercial Bank of China (ICBC)Standard Bank, and has previously held senior Operational Risk roles at MUFG Securities, RBS and Lloyds TSB. Prior to this, Michael worked for a decade as a management consultant at PwC and Deloitte Consulting, and he has also been a Director of the Institute of Operational Risk.Michael has written a number of articles on setting appetite for Operational Risk; scenario analysis; emerging risks and modelling Operational Risk capital. His book Managing Operational Risk: New Insights and Lessons Learnt was published by RiskBooks in 2016.
Includes bibliographical references and index.
TABLE OF CONTENTS
About the Author x
Introduction xii
Part 1 Ten Laws of Operational Risk (Grimwade, 2020) 1
Chapter 1 Patterns in the Behaviour of Operational Risk 5
Chapter 2 The Occurrence and Severity of Loss Events 15
Chapter 3 Concentration and Systemic Operational Risk Events (SOREs) 51
Chapter 4 Homeostasis, Risk Transference, Transformation and Conservation, and Active Risk Taking 63
Chapter 5 Three Taxonomies: Inadequacies or Failures, Impacts and Causes 75
Chapter 6 Conclusions – How and Why 97
Part 2 Operational Risk Management Tools Designed for Success 115
Chapter 7 Defining and Cascading Operational Risk Appetites 119
Chapter 8 Risk & Control Self-Assessments 135
Chapter 9 Scenario Analysis 147
Chapter 10 Operational Risk Capital Modelling 165
Chapter 11 Stress Testing 181
Chapter 12 Reverse Stress Testing and the Transfer of Risks via Insurance 211
Chapter 13 Day-to-Day Operational Risk Management 229
Chapter 14 Conclusions 267
Part 3 Predictions of the Future Behaviours of Operational Risk 275
Chapter 15 Identifying Emerging Risks 277
Chapter 16 Predictions of the Future Behaviours of Operational Risk in Response to Four Emerging Threats 283
Part 4 Conclusions 329
Chapter 17 Conclusions and Operational Risk Strategy 331
Appendices
Appendix I Taxonomy of Inadequacies or Failures: Events and Control Failures 349
Appendix II Impact Taxonomy and Their Relative Scales and Velocities 359
Appendix III Causal Taxonomy Based Upon a Review of Large, Well-Documented Events 363
Appendix IV Risk Taxonomies for Cybercrime and IT Operational Risks Based on Analysis of Actual Loss Events 369
Glossary 377
Bibliography 381
Index 387
"Unlike Credit and Market Risk, Operational Risk is lacking an overarching theory as to how and why Operational Risk losses occur. This book not only provides this theory but goes onto apply it both to the redesign of the profession's existing tools and to make predictions as to how Operational Risk will behave in the future. The book is divided into three parts. The first section analyses Operational Risk loss data that has been systematically collected to identify patterns and trends. It then defines Ten Laws to explain these behaviours. The first five laws describe individual events, whilst the remaining five relate to groups of losses suffered by either individual firms or the industry as a whole. This section also includes taxonomies for causes, events and impacts. It concludes by assessing the effectiveness of these laws in explaining the observed patterns and trends. Section 2 applies the Ten Laws to the redesign of the profession's tools. Despite these tools evolving over the last three decades, through trial and error, they remain a source of widespread dissatisfaction. Systematically utilising the Ten Laws resolves many of the framework issues with which practitioners have struggled, such as, identifying predictive Key Risk Indicators. As it is emerging risks that are habitually cited as keeping CROs awake at night, the last section sets out a structured approach for their identification. It then applies the Ten Laws to make systematic predictions as to the future behaviour of Operational Risk in response to four key emerging risks: Pandemics, Climate Change, Cyber-Crime, AI and Machine Learning. The book concludes by considering how the various tools should be integrated into a holistic Operational Risk strategy to provide commercial value by supporting firms to stay within appetite, both now and in the future, grow their businesses both quickly and safely, and meet their stakeholders' expectations"-- Provided by publisher.
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