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Copy of Operational Risk in Treasury Management

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by

Abhishek Sahu

on 3 August 2013

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Transcript of Copy of Operational Risk in Treasury Management

OPERATIONAL RISK IN TREASURY MANAGEMENT
OPERATIONAL RISK
RISK CONTROL AND SELF ASSESSMENT
Swati Jaiswal
Roll No. 38
OBJECTIVE
To have the detail knowledge about the treasury processes followed in banks
To get acquainted with operational risks involved in such processes
To learn about the various controls available for the processes
To categorize the identified operational risks in treasury processes in event and sub event category
TREASURY MANAGEMENT
Mid-Office:

Front-Office:
Back–Office

Dealing –Risk Taking
Risk Management,
Risk Measurement
Management information
Confirmations
Settlements
Accounting
Reconciliation

Dealing Systems
METHODS OF OPERATIONAL RISK MANAGEMENT
Loss Data Analysis
RCSA
KRI
Scenario Analysis


BASEL II’s APPROACHES TO OPERATIONAL RISK
Basic Indicator Approach
Standardized Approach
Advanced Measurement Approaches (AMA).
 


ANALYSIS AND RESULTS
Workflow at Forex Inter Bank Desk
Workflow at Derivatives Desk
Workflow at SLR desk
Workflow at CRR and Money Market desk
Workflow at Non-SLR desk
Carrying out assessments
1. Level
2. Approach
-Net Risk Assessment
-Gross Risk Assessment
3. Scoring
4. Cause, event and effect
5. Control assessment
6. Monitoring assessments
Quantitative Assessment of RCSA in Banks
RCSA Analysis of Treasury Front Office
KEY RISK INDICATOR(KRI)
KRI OF TREASURY FRONT OFFICE
FINDINGS AND CONCLUSION
From the risks identified, the conclusion is that the major operational risks in treasury processes are due to the process and system
For this reason, it is critical that the board and senior management actively monitor the adequacy of the risk management framework
The sanctions for breaches of internal policy should be clear and strict
Reinforce the norms of prudent behavior by acting promptly when breakdowns or breaches occur. For this automation is a prerequisite. For example, if a particular limit is violated in a deal the system (software used by the bank) should not accept the deal and thus, deal cannot be concluded. Thus, risks can be controlled.
For overcoming risks due to IT problems, following can be the controls:
Software quality management
Outsourcing (software development): In the case of IT outsourcing (software development), too, the credit institution has to make sure that it stays in a position to assess the risk situation and take appropriate measures to limit risk
For minimizing risks due to people mistakes,
Establishment of a corporate culture
Practice of principle of business ethics
Internal audit, etc.

EXECUTIVE SUMMARY
COMPARISON
Full transcript