OPERATIONAL AUDITING

By

TOMMY SEAH FCPA, CFE, ACIB, MSID, Member IBBM

Operational risk according to the Basle Committee specifically, is defined as ‘the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events’.

This is a very wide definition, which includes legal risk but excludes strategic and reputational risk.

The Committee emphasises that the precise approach chosen by a bank in the management

of its operational risks depends on many different factors (size, level of sophistication,

nature and complexity of operations, etc.). Nevertheless, it provides a more precise

definition by adding that despite these differences, clear strategies supervised by the board

of directors and management committee, a solid ‘operational risk’ and ‘internal control’

culture (including among other things clearly defined responsibilities and demarcation of

tasks), internal reporting, and plans for continuity8 following a highly damaging event,

are all elements of paramount importance in an effective operational risk management

structure for banks, regardless of their size and environment.

Program Focus : Although the definition of operational risk varies de facto between financial institutions,

it is still a certainty that some types of event, as listed by the Committee, have the potential

to create substantial losses:

• Internal fraud (for example, insider trading of an employee’s own account).

• External fraud (such as forgery).

• Workplace safety.

• All matters linked to customer relations (for example, money laundering).

• Physical damage to buildings (terrorism, vandalism etc.).

• Telecommunication problems and system failures.

• Process management (input errors, unsatisfactory legal documentation etc.).

Trainer and Coach

Tommy Seah, FCPA, CFE, FAIA,ACIB

He is the Chairperson of CSI-World Headquarters and the elected Vice Chairman of The Association of Certified Fraud Examiners Board of Regents based in Texas, USA. CFE is a post graduate professional qualification recognized by the FBI and USA Central Intelligence Agency in it’s recruitment of auditors for combating fraud. His services in providing technical training is much sought after by numerous banks in the region, including Germany, Singapore, Malaysia, China, Indonesia, Philippines and Taiwan. Tommy's previous experience includes systems based auditing in an American International Bank, where he was the Senior Regional Auditor responsible for the Bank's audit in the Asia Pacific region. He has also held the top executive position of Chief of Internal Audit in a prime offshore bank where his audit duties cover the Singapore and Hong Kong operations of the bank. He covers all areas of the bank's audit of operations and IT systems. He also has practical working experience in the Operations Department of a foreign bank. Tommy Seah is the author of seven banking books including the F.I.G. Program. The FIG is the authoritative and definitive text on Financial Instruments designed to be used in the world wide banking industry for product training. This publication has received excellent review and first class commendation from some of the most authoritative professional certification body and top rated banks in the world. The other six authoritative texts used in his training are The Foreign Exchange Audit,The Control of Money Market Activities in Banks, Financial Management, MCA for Banks, SWAPS in Investment Banking and Anti-Money Laundering 101. His latest publication is Understanding and Auditing BASEL II, Operational Risk Management.

For the past twenty eight years, Tommy Seah has trained some of the top banks and financial institutions in the region. In particular, his expertise in SOX 404, AML and Basel II systems implementation is much sought after by financial institutions and banks in Germany, Brunei, China, Indonesia, Malaysia, Philippines, Singapore, Taiwan and Thailand.