Post on 13-Jan-2016
Operational Risk Management (ORM)in a growing microfinance industry
Michael KortenbuschBFC Managing Director
November 15Luxembourg
2
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
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)
6Operational risk management process
Implementation Planning
AnalysisDecision
Loss registrationLoss registration
Risk Self Assessments (RSAs)Risk Self Assessments (RSAs)
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
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
9Operational risk management process
Implementation Planning
AnalysisDecisionReviewReview
Approval of risk mitigation actionsApproval of risk mitigation actions
10Review
Step 1: Number of Operational Losses per year end
Step 2: Process allocation
Step 3: Complaints per Process
11Operational risk management process
Implementation Planning
AnalysisDecision
CommunicationCommunication
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
17BFC offers
Max-Högger-Strasse 6 Phone: +41 44 784 22 22 info@bfconsulting.comCH-8048 Zurich, Switzerland Fax: +41 44 784 23 23 www.bfconsulting.com