Operational Risk Management

– A Strategic Approach to Business Sustainability

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Outlook

For any business to succeed and stay ahead of the pack, these ingredients are required: A well thought out plan A business model that creates a unique identity A culture that is strong and cannot be imitated

These ingredients make up what can be termed as the “Strategy” of the organization

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Features of a Good Strategy Transforms the organization continuously

Target driven with short, medium and long term goals

Formal and Confidential document that is made up of interlinked checklists

Provides details on input requirements – engine required to drive and achieve goals

Is the ‘Daily Guide’ of the organization, and is reviewed periodically

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Points of Leverage

Achieved with the existence of an All-In Mentality – goals are individually and collectively driven

Is driven by a Strong Culture

Aims at goals that are of Common Interest

Ensures Internal Integration

Responds to the Environment

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Dimensions of A Strategy

Micro and Macro Issues

Personal vs. Corporate Interest

Input requirements

Process requirements

Output / Achievement

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Contexts To Consider

International Influence

Industry Leadership

Organisational Growth

Managerial Ability

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Points to Ponder On For an organization to remain relevant, it must have a

strategy for achieving Competitive Advantage

To have the right Strategy, it must have the right Outlook

To achieve the Strategy it must have the right resources – people, processes, systems and response to shocks

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Long and Short…

No Strategy can achieve its goals without a plan to manage:

People resources Processes Systems External / Unforeseen Events

A Strategy is achieved when these resources are optimally managed

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

To effectively manage these issues, optimal Operational Risk

Management is non-negotiable...

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Introducing Operational Risk Management (OpRisk) OpRisk manages the loss or risk of loss resulting from

improper or non-management of people, process, system and externally triggered issues

It measures: The probability that business objectives may not be

met due to operational issues The degradation, effectiveness and consistency in

managing operational issues

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Components of OpRisk Mgt People Risk Issues

Process Risk Issues

System Risk Issues

External Risk Events

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Tools of OpRisk Mgt

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

People Risk Issues

Quality of Recruits; Sourcing and Selection strategy

Controls embedded in the recruitment process such as background checks

Retention strategy for top-talents

Strategy for training; Acculturation of staff

Monitoring Attrition rate and concentrations

Managing and benefiting from staff exits

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Crfocus.wordpress.com

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Process Issues Effectiveness of process designs – simple or complex;

flexible or rigid

Manual vs. Automated processes

Cost effectiveness of process controls

Performance gradient offered

Adequacy of embedded controls; Execution of controls

Vendor Management

Occupational Health & Safety Issues

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Lazypm.blogspot.com

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

System Issues

Availability of core applications / systems

Network intrusion

Denial of service

Data corruption / Sabotage

Unauthorised Access to Information

System Penetration Issues

Virus Attack

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

www.computerweekly.com

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

External Events Adherence to Regulatory Stipulations

Legal Risk Management

Business Continuity Management

Compliance Risk Management

Shift in Industry trends; Global trends

Macro-economic conditions

Available Infrastructure

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Points of Leverage Sorted All-In Mentality – People Strategy

Strong Culture – People + Processes Strategies

Common Interest – People Strategy

Internal Integration – People + Processes + Systems + External Response Strategies

Responds to the Environment – People + Processes + Systems + External Response Strategies

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Drivers of OpRisk And Strategy

OpRisk Management Strategy

Focused on sustainable Value Creation

Drives and Delivers Value Creation

Is inherent in all business activities

Determines Business Activity

Ensures Risk Optimal Mitigation

Is built on Meaningful Risk Taking

Measured by Risk Indicators

Measured by Performance Indicators

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Food for Thought

Is Operational Risk Management not integral

in achieving your organization’s Strategic Goal and Competitive

Advantage?

OpRisk Mgt as a Strategic Tool – Eneni Oduwole, Mar. 2013

Thank you...Eneni Oduwole

Group Head, Operational Risk Management

Guaranty Trust Bank Plc

eneni.oduwole@gtbank.com

234-8033045896