operational risk management (orm) in a growing microfinance industry michael kortenbusch bfc...
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Operational Risk Management (ORM)in a growing microfinance industry
Michael KortenbuschBFC Managing Director
November 15Luxembourg
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Who is involved?
ORM Process
Success Factors
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General ManagementGeneral Management
Line Function 1Line Function 1 Line Function 2Line Function 2 Line Function 3Line Function 3 Line Function 4Line Function 4 Line Function 5Line Function 5
Risk ManagementRisk Management
Who is involved?
BoardBoard
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4Operational risk management process
Top Down Assesment (TDA)Top Down Assesment (TDA)
Implementation Planning
AnalysisDecision
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Strategic objective
PriorityRisk identification
Risk — process allocation Measure
Portfolio growth 40%
PAR increase- Risk occurs in training- Risk occurs in internal
control....
Takeover of competitor
Legal risks
Risk occurs in legal review RSA in
process YZ
Objective 3
… … ....
Objective 4
Risk B Risk B occurs in process XY
RSA in process XY
Top Down Assessment (TDA)
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6Operational risk management process
Implementation Planning
AnalysisDecision
Loss registrationLoss registration
Risk Self Assessments (RSAs)Risk Self Assessments (RSAs)
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7Register Operational Losses
Approval Information Assessment
ORMCommittee
Credit note orcomplaint Registration
1
Definition ofaction plans
Line staff
Risk Management
Management Board
2 3 4 5
Follow up
7 86
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8Risk Self Assessment
15.11.2012
Risk Experience Effect Action for risk prevention Likelihood a* Impact b* RPF r** Ranking
Serve the customer
Customer doesn’t know
products
Customer dissatisfaction Complaint Training.
handouts 5 7 35 1
Frequent power cuts
Demotivation of staff
Loss of customer data
Installation of generators 3 5 15 2
Fraud Image damage Loss of assets Strengthen internal control 2 3 6 3
0 5
0 6
0 7
0 8
0 9
0 10
0 11
0 12
0 13
0 14
0 15
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9Operational risk management process
Implementation Planning
AnalysisDecisionReviewReview
Approval of risk mitigation actionsApproval of risk mitigation actions
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10Review
Step 1: Number of Operational Losses per year end
Step 2: Process allocation
Step 3: Complaints per Process
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11Operational risk management process
Implementation Planning
AnalysisDecision
CommunicationCommunication
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12Communication
LocalManagement
Board
Staff
Corporation/Mother
Company
ORM
RegulatingBank
Department Heads
Authorities
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Success factors for Operational Risk Management
Must have
HARD FACTSDefined processesORM Tracking System
SOFT FACTSCommitted managementStaff awareness
Will have
HARD FACTSProceduresRM Committee
SOFT FACTSTrained staff
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"To win without risk is to triumph without glory."— Pierre Corneille
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17BFC offers
Max-Högger-Strasse 6 Phone: +41 44 784 22 22 [email protected] Zurich, Switzerland Fax: +41 44 784 23 23 www.bfconsulting.com