Reflections on OpRisk Management
First published:
ISBN: 9781782723493
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Six Steps for Preventive KRIs
Six Steps for Preventive KRIs
Introduction
Operational Risk in Four Letters
An Invisible Framework
Small is Beautiful in OpRisk Management
The Business Value of ORM
How to Minimise ‘People Risk’
The Missing Piece
Risk Appetite and Framework
From Russian Roulette to Overcautious Decision-making
The Importance of Preventive KRIs
How to Build Preventive Key Risk Indicators
Unlocking KRIs
Six Steps for Preventive KRIs
Have Your Cake and Eat It
Conduct, Not ‘Conduct Risk’
How to Manage Incentives
Is Reputation Risk Overstated?
What Regulators Want
Conduct & Culture
OpRisk Takes Forward Steps at OpRisk Europe 2014
Modern Scenario Analysis
The Rogue’s Path
Rogue Trading No Training: The Connections
What Brexit Teaches OpRisk
OpRisk Survey Shows the Insidious Effects of Political Risk
Discarding the AMA Could Become a Source of OpRisk
UCL Research Shows that SMA Reforms Introduces Capital Instability and Discourages Risk Management
Memo to Bank CEOs: Treat OpRisk with More Respect
Don’t Let the SMA Kill OpRisk Modelling
Key risk indicators, or KRIs, are major components of the operational risk profile reports for nearly seven out of 10 of the institutions surveyed by OpRisk and Protiviti at the end of 2014. A majority of respondents (60%) also use KRIs as a measure of the operating effectiveness of the control environment. Contrastingly, only 39% of the organisations surveyed declare using 20 KRIs or more, while 15% use fewer than 5 and 14% use none.
This column proposes a six-step method to identify, design and validate preventive KRIs, which are an essential component of any operational risk framework.
Preventive KRIs are metrics of key risk drivers. Identifying the key risks to an organisation, understanding the main drivers of these key risks and finding the proxies of these drivers to turn them into economically efficient and reliable risk reporting, are the essential steps to set up an effective KRI suite. This method can be broken into six steps.
Figure 12.1 shows a classification of operational risks that can support the identification and design of preventive KRIs. In Chapter 5 I list many of the KRIs that can be used to monitor people risk, in close collaboration with the HR
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