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MANAGEMENT
Mr. T. P. Nageswara Rao, GM (ERM)
Presentation Outline
2
Risk Management
Understanding
What is Risk?
4
Danger?
Restrictions
?
Risk
Uncertaintie
s?
Losses?
March 30, 2012
Introduction
5
Risk Definition
The
quantifiable
expectations
likelihood
Risk is unavoidable
of
deviations
from
Risk Management in
Banking
High leverage
Changing regulations
Types of Risks
7
Credit Risk
Market Risk
Liquidity Risk
Interest Rate
Risk ..
Concentration
Risk
Contagion
Risk
Earnings
Volatility
Risk
Business Risk
Strategic Risk
Reputation
Risk
Financial
Risk
Business
related
Risks
Other
Risks
Operation
al Risk
People Risk
System Risk
Process
Risk..
March 30, 2012
Interdependencies of Risks
8
10
11
Board of Directors
Credit Risk Management Committee
(CRMC) MD(IB), DMD & CCRO,
DMD (CBG, MCG, GM)
CGM (RM)
GM
(Credit Risk)
GM
(Enterprise
Risk)
GM (CISO)
DGM
(Basel II)
DGM
(Market Risk)
DGM
(Operational
Risk)
DGM
(Group Risk)
Credit Risk
Management
Team
Enterprise Risk
Management
Team
CISO Team
Market Risk
Management
Team
Operational Risk
Management
Team
Group Risk
Management
Team
BASEL II
13
BCBSs Basel
Accord:
streamlining
the
Risk
Practices
Platform for
Management
Basel II
Pillar I
Minimum
Capital
Requirement
Credit Risk
Market Risk
Operational
Risk
Pillar
II
Supervisory
Review Process
Liquidity Risk
Interst Rate
Risk
Concentration
Risk
Strategic Risk
Reputation Risk
and many more
Pillar
III
Market
Discipline
Disclosures
14
Standardised Approach
20
Operational Risk
Management
Operational Risk: the risk of loss resulting from inadequate
or failed internal processes, people and systems or from
external events
Basic Indicator Approach (BIA)
Capital for operational risk: average over the previous three years of a fixed
percentage (15% - denoted as alpha) of annual gross income.
Gross income is defined as net interest income plus net non-interest income,
excluding realized profit/losses from the sale of securities in the banking book
and extraordinary and irregular items
Banks activities are divided into 8 business lines and Capital charge for each
business line is calculated by multiplying gross income by a beta factor
21
Operational Risk
Management
22
Operational Risk
Approaches
Business Line
Corporate Finance
Trading and Sales
Payment and
Settlement
Commercial Banking
Agency Services
Retail Banking
Asset Management
Retail Brokerage
23
Operational Risk
Management
BEICF
through
25
Beyond Basel II
27
Enterprise Risk
Management
a process,
process effected by an entitys board of
directors, management and other personnel,
personnel
applied in strategy and across the enterprise,
designed to identify potential events that may
affect the entity, and manage risk to be within its
risk appetite,
appetite to provide reasonable assurance
regarding the achievement of entity objectives
objectives
Committee Of Sponsoring Organizations (COSO)
28
To Conclude
30
31
Group Work
Identification of Top 3 Risks faced by the
Bank in the present scenario based on
your experience in audit assignments
32
THANK YOU