Managing Operational Risk: New Insights and Lessons Learnt addresses the root causes of the unprecedented operational risk losses suffered after the financial crisis; the new and emerging operational risk threats; and the lessons to be learnt for those working within the sphere of operational risk. Through the use of case studies and analysis of industry trends, Michael Grimwade examines how we can make operational risk management more effective.
The book is structured around the following three questions:
- Why did banks suffer such large operational risk losses during the financial crisis?
- What is going to cause banks to suffer large operational risk losses again in the future?
- What should operational risk managers do differently?
It will answer these questions in three sections: the first analyses the drivers behind a series of large operational risk losses; the second sets out potential future threats by examining existing trends, past patterns, and parallels with other industries; the third looks at how operational risk management frameworks can better equip firms in order to avoid repeating the mistakes of the past.
- Three Historical Spikes in Operational Risk Losses
- First Order Effects: Transforming Credit Defaults and Market Turmoil into Operational Risk Losses
- Second Order Effects: Transforming Rising Unemployment and Falling Interest Rates into Operational Risk Losses
- Regulatory Change: The Costs and Consequences
- Macroeconomic Threats: Tax Issues and Eventually Rising Interest Rates
- New Technology: Changing Business Models and Risk Profiles
- Aligning Operational Risk Management Frameworks to Appetites
- Estimating Exposures to Tail Events
- Solutions for a Triumvirate of Seemingly Intractable Problems
- Book - 9781782722861 / eBook - 9781782723059
- Publish date
- 29 Jul 2016
- 155mm x 235mm
Table of contents
About the Author
Part I: What were the Root Causes of the Unprecedented Spike in Operational Risk Losses after the Global Financial Crisis?
1. Three spikes in Operational Risk losses
2. First-Order effects: Transforming Credit Defaults and Market Turmoil into Operational Risk Losses
3. Second-Order effects: Transforming Rising Unemployment and Falling Interest Rates into Operational Risk Losses
4. Conclusions and Root Causes
Part II: What are the New and Emerging Operational Risk Threats?
Introduction to Part II: What are the new and emerging Operational Risk threats?
5. Regulatory change: Part of a Perfect Storm
6. Macroeconomics Threats: Tax, Rising Interest Rates and New Asset Bubbles
7. New Technology: Changing Business Models and Risk Profiles
8. Three Horseman: Societal, Political and Environmental change
9. Backtesting to the Mid-1990s and Conclusions
Part III: What Lessons can the Profession Learn?
Introduction to Part III: What Lessons can the Profession Learn?
10. Defining and cascading Operational Risk appetites
11. Aligning Operational Risk Management Frameworks to Appetites
13. Estimating Exposures to Tail Events
14. Solutions for a Triumvirate of Seemingly Intractable Problems
Appendix 1: The Chronology of the LIBOR Scandal
Appendix 2: Some Examples of Common Scenarios
Appendix 3: Mapping of Reputational Risk incidents to Operational, Conduct and Business Risks
"Michael Grimwade has delivered indeed a book on operational risk that resembles no other, providing new insights and pushing the boundaries of what operational risk managers typically contemplate. Unlike its title, the book goes beyond the scope of operational risk and explores, to some length, systemic risks and long term environmental developments that could affect the financial industry and banks in particular. Each of the 14 chapters are illustrated by citations of eclectic sources, including my favourite, from Star Wars’ Yoda, opening a section on action plans: “Do or do not, there is no try”.
Profound understanding doesn’t happen overnight. This book by Michael Grimwade is the result of years, even decades of experience, observation and intelligent analysis of the banking industry that he knows so well. He has achieved the performance of producing a book that will appeal equally to risk specialists and larger audiences. Operational risk professionals will find in Part 3 further insights and answers to some of their recurring questions; financial risk specialists will appreciate in Part 1 the analysis of the relationships between credit, market and operational risks; while business leaders will find interest in the long term view and strategic positioning of Part 2. Overall, regulators, market observers and everyone having at heart the stability and soundness of the financial sector will find in the entire book important insights and ideas for the years to come."
Dr. Ariane Chapelle, University College London
"Grimwade presents some particularly in-depth analysis of the Libor rigging scandal – and uses a number of other case studies to illustrate his points throughout the book.
While it deals with a substantial and complex topic, a number of pithy, often humorous and always insightful quotes appear throughout this book that serve to remind the reader of the importance of the human perspective as well as of risk ownership."
Deborah Ritchie, Editor, CIR