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OIRM-11-principles-for-the-sound-management-of-operational-risk.html
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<title>Operational and Integrated Risk Management | Chapter 11 | Principles for the Sound Management of Operational Risk</title>
<meta name="description" content="Financial Risk Manager Part 2 Study Materials">
<meta name="author" content="MacLane Wilkison">
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<h1>Chapter 11</h1>
<h3>Principles for the Sound Management of Operational Risk</h3>
<p>
<small>Created for <a href="http://alchemistsacademy.com">Alchemists Academy</a> by <a href="http://alchemistsacademy.com/about">MacLane Wilkison</a></small>
</p>
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<section>
<h2>Principle 1</h2>
<p>The board of directors should take the lead in establishing a strong risk management culture. The board of directors and senior management should establish a corporate culture that is guided by strong risk management and that supports and provides appropriate standards and incentives for professional and responsible behavior. In this regard, it is the responsibility of the board of directors to ensure that a strong operational risk management culture exists throughout the whole organization.</p>
</section>
<section>
<h2>Principle 2</h2>
<p>Banks should develop, implement and maintain a Framework that is fully integrated into the bank's overall risk management processes. The Framework for operational risk management chosen by an individual bank will depend on a range of factors, including its natures, size, complexity and risk profile.</p>
</section>
<section>
<h2>Principle 3</h2>
<p>The board of directors whould establish, approve and periodically review the Framework. The board of directors should oversee senior management to ensure that the policies, processes and systems are implemented effectively at all decision levels.</p>
</section>
<section>
<h2>Principle 4</h2>
<p>The board of directors whould approve and review a risk appetite and tolerance statement for operational risk that articulates the nature, types and levels of operational risk that the bank is willing to assume.</p>
</section>
<section>
<h2>Principle 5</h2>
<p>Senior management should develop for approval by the board of directors a clear, effective and robust governance structure with well defined, transparent and consistent lines of resonsibility. Senior management is responsible for consistently implementing and maintaining throughout the organization policies, processes and systems for managing operational risk in all of the bank's material products, activities, processes and systems consistent with the risk appetite and tolerance.</p>
</section>
<section>
<h2>Principle 6</h2>
<p>Senior management should ensure that the identification and assessment of the operational risk inherent in all material products, activities, processes and systems to make sure the inherent risks and incentives are well understood.</p>
</section>
<section>
<h2>Principle 7</h2>
<p>Senior management should ensure that there is an approval process for all new products, activities, processes and systems that fully assesses operational risk.</p>
</section>
<section>
<h2>Principle 8</h2>
<p>Senior management should implement a process to regularly monitor operational risk profiles and material exposures to losses. Appropriate reporting mechanisms should be in place at the board, senior management, and business line levels that support proactive management of operational risk.</p>
</section>
<section>
<h2>Principle 9</h2>
<p>Banks should have a strong control environment that utilizes policies, processes and systems; appropriate internal controls; and appropriate risk mitigation and/or transfer strategies.</p>
</section>
<section>
<h2>Principle 10</h2>
<p>Banks should have business resiliency and continuity plans in place to ensure an ability to operate on an ongoing basis and limit losses in the event of severe business disruption.</p>
</section>
<section>
<h2>Principle 11</h2>
<p>A bank's public disclosures should allow stakeholders to assess its approach to operational risk management.</p>
</section>
<section>
<h1>THE END</h1>
<h3><a href="http://alchemistsacademy.com">AlchemistsAcademy.com</a></h3>
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