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Week 5 Flashcards

1
Q

What is Incident Data Collection

A

gathering information about
incidents and events that may pose risks to the organization

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2
Q

Purpose of Incident Data Collection

A

create a comprehensive database that aids in risk assessment and management.

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2
Q

Importance of Incident Data Collection

A

identifying patterns, understanding root causes, improves risk management

Supports compliance with regulatory requirements

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2
Q

4 Incident Data Collection Methods

A

Automated Systems
Manual Reporting
Audits
Existing Sources

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3
Q

What existing sources can provide incident data

A

general ledger,
customer complaints,
IT logs,
legal provisions

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4
Q

4 Benefits of Comprehensive Data Collection

A

Trend Analysis
Risk Assessment
Compliance
Improvement

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5
Q

What is the Importance of Loss Reporting

A

Incident data collection
Data beyond regulation
Regulatory capital
Pillar 2 Compliance
BCBS Data Quality Requirements

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6
Q

What are BCBS Data Quality Requirements

A

Must maintain a 10-year history, a €20,000
threshold

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7
Q

What is a major driver of capital requirements under Basel regulations

A

Loss Data

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8
Q

what are Near Misses

A

Avoided losses by luck or accident outside of normal controls

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9
Q

Indirect vs. Direct Losses

A

Direct: Immediate financial consequences

Indirect: Resulting impacts - loss customers, reputational, compliance costs, lower morale.

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10
Q

What is Non-Financial Impacts Fallacy

A

That “non-financial impacts have real financial consequences

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11
Q

What is used to ensure consistency in
reporting the incident data

A

drop down menus

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12
Q

How to to avoid over-reporting incident data

A

Stick to essential core data fields

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13
Q

What does net loss reported show

A

net includes reimbursements

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14
Q

what does gross loss reported show

A

Total impact

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15
Q

What do loss reporting thresholds vary between

A

0-20k, must be justified

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16
Q

What Key Dates should be recorded to avoid discrepancies

A

discovery, occurrence, reporting, and accounting dates

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17
Q

Within what timeframe should material incidents be reported

A

2-5 days

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18
Q

Minor incidents reporting timeline

A

summarized periodically

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19
Q

How should severity be judged

A

Use potential impact, not just actual losses, Near misses and unintentional gains should be treated like actual losses

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20
Q

How is severity rated for ease

A

severity bands (e.g., >10k, >100k)

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21
Q

Steps of the incident data collection process

A

Reporting
Recording
Reviewing
Analyzing
Send reports

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22
Q

Who do incident data collection reports go to

A

management and regulatory bodies

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23
3 Types of Incident Data
Internal, External, NEar misses
24
Types of internal incident data
Operational failures, process breakdowns, human errors
25
Types of external incident data
Market disruptions, regulatory changes, competitor failures
26
What is the process of incentivising timely reporting
Incentive Practices Self-Reporting Requirements Risk Metrics in Scorecards Economic Capital Allocation
27
What is a Boundary Event
when the impact materializes in a different risk class than the cause
28
what is the Basel Committee Approach to boundary event reporting
Basel suggests recording events where they materialize
29
benefit fo integrated Data Collection
leverage existing databases instead of standalone systems, reducing effort, duplication, and improving data quality
30
Which data sources lead into opRisk incident data
- BO issue logs - General Ledger - LEgal provisions - IT Logs P!, P2 - PRess/media - Customer complaints
31
How to ensure Incident Data Quality and Accuracy
Standardized Reporting Training Verification Confidentiality Assurance
32
what are the Challenges in incident Data Collection
Underreporting Data Quality Integration Timeliness
33
Why is underreporting a risk of incident data
Fear of blame or repercussions
34
What are the Future Trends in Incident Data Collection
EMERGING TECH - BLOCKCHAIN, BIG DATA, IOT PREDICTIVE ANALYTICS GLOBAL TRENDS
35
what are Key Risk Indicators (KRIs)
metrics that monitor risk levels and effectiveness of controls
36
purpose of KRIs
provide early warning signs of potential risk events and to support proactive risk management
37
Importance of KRIs
* identifyies/mitigates risks * Supports regulatory compliance and enhances decision-making
38
4 categories of KRI indicators
Exposure Stress Failure Causal
39
what are stress indicators
The stretch in organizational resources
40
what are casual indicators
the root causes and drivers of key risks
41
Role of KRIs
* Monitor risk and it's potential impacts *Translate risk appetite, defined at board level
42
what do LEading Indicators (KRIs) do
Focus on risk drivers
43
what are lagging kris
Track events that have already occurred, identifying weaknesses in the control system that need correction
44
what makes leading KRIs effective?
* Early Warning Devices * Risk-Specific * Business-Relevant * Data-Driven * Owned by Business Units
45
what are the Factors of Reflecting BEICF
be risk sensitive provide management with risk profile represent exposure drivers used across the entire organization
46
4 steps to Implementation of KRIs
Identify Relevant Metrics Set Thresholds Assign Responsibilities Regular Review and Update
47
Exposure KRI example in financial services
Market volatility affecting trading volumes
48
Stress KRI example in financial services
Overtime hours
49
Failure KRI example in financial services
% failed trans recs
50
Causal KRI example in financial services
internal fraud
51
what are KRIs
Metrics tracking exposure to operational risk, in likelihood or impact.
52
What are KPIs
Measure performance
53
What are KCIs
Measure control effectiveness, signaling control weaknesses or failures
54
Who should KRIs be used and owned by
business leaders
55
How often should IT KRIs be monitored
real time
56
How often should HR KRIs be monitored
quarterly
56
How can KRIs be made cost efficient
Use metrics already monitored; automate data
57
characteristics of Effective KRIs
*Capture a risk cause. * Use available/easily collectible data. * Measure a vulnerability.
58
Why should you Avoid Commercial KRI Databases
Too broad, instead network w peers or use risk associations
59
over what period are historical trends observed
over 3–18 months depending on the activity
60
Cluster-based KRI Design
a jump in data may constitute a natural threshold.
61
KRI RAG Rating meaning
*Green: No action *Amber: Monitor (some firms act) *Red: Act
62
How do KRI thresholds vary
by department or business unit based on risk appetite, but governance must be uniform
63
When must Roles and actions be defined
before an indicator turns red
64
who are KRIs designed collaboratively between
the business and the risk function
65
who is responsible for actions when thresholds are breached
*Every KRI has an owner responsible
66
How to prevent manipulation of KRIs/ conflict of interest
KRI values should ideally be automatically captured or objectively observable
67
What are the 3 Golden Rules of Reporting
Value > Cost Clear purpose - influence decisions Purposeful reporting
68
Challenges in Risk Reporting
Balancing info Preventing oversimplification filtering properly Aggregating data without losing any Maintaining engagement
69
Where does risk monitoring occur
at operational level
70
Which 'top risks' are reported
the top ten risks reported to the board and risk committee
71
How are top risks reported
Actionable insights, not just status updates
72
What is reported in incident reporting
Number and size of events. Trends and top loss events.
73
Frequency of incident reporting
Usually monthly, sometimes weekly in large banks.
74
What happens with risk monitoring result/data
Alerts and summary data are escalated to management.
75
How are KRI/issues monitored
Dashboard tables with thresholds, status, and colors.
76
importance of Validation KRI Framework
Ensures KRIs remain reliable and valuable
77
KRI Validation Method
track KRI colors in loss reporting databases
78
What does a Green indicator during an incident suggest
the KRI may be ineffective
79
What does a red indicator during an incident suggest
breakdown in governance if it didn’t prevent the incident
80
4 Challenges in Using KRIs
Data Availability Threshold Setting Integration Continuous Improvement
81
What are Preventive KRIs
Continuous refinement of KRIs helps to understand and mitigate operational risk.
82
Benefits of Effective KRI Programs
Proactive Risk mgmt Enhanced Decisions Regulatory Compliance Improved Operational Resilience
83
What are the Future Trends in KRI Development
Advanced Analytics - Big Data ERM Integration Dynamic KRIs Collaborative development
84
What is risk reporting
COMMUNICATING INFO ABOUT RISK ENVIRONMENT, EXPOSURE, MANAGEMENT ACTIVITIES TO STAKEHOLDERS
85
Risk reporting purpose
Inform decision making ensure compliance with regs
86
Department Heads focus within risk reporting
Info requiring action, plus periodic summaries
87
What is Risk Monitoring
Continuous tracking of risk metrics and control effectiveness
87
what is worst case reporting when aggregating data
Report the worst score in a dataset conservatively.
88
What does risk reporting focus on
"need to know" information
89
How should RAG of aggregated data be reported
Report percentages of risk categories, Avoids misleading averages and provides a balanced view
90
Process & Risk Management focus within risk reporting
All data needed to monitor
91
what is Risk Reporting
Escalation of significant issues and summary data to higher management levels
92
what type of information does risk reporting focus on
Focuses on decision-making information
93
Best Practice of Risk reporting
* Focus on controls not risks alone. * balanced reporting: Report red and green * clear risk taxonomy to classify and report risks.
94
Executive Committee focus within risk reporting
High-level data for decisions
95
How should qualitative metrics be aggregated
Convert into monetary units for aggregation
96
Conduct reporting metrics
missed training, disciplinary actions, and compliance breaches
97
Can risk be averaged
No
97
alternatives to averages in risk
median and quartiles averaging pitfalls Splitting Loss data
98
What is splitting loss data
Data split into: Expected Losses (EL): Small, frequent Unexpected Losses (UL): Large, infrequent events- reported individually.
99
Why use gross income as a benchmark for operational losses
Reporting losses as a percentage of gross income captures SM attention
100
What does a 1.8-2.2% income:op risk loss ratio show
High-performing operational risk management
101
What does a 2.2- 3% income:op risk loss ratio show
Common Range
102
What does a 3%+ income:op risk loss ratio show
High losses
103
What does a income:op risk loss ratio of less than 1.5% show
underreporting
104
How can data be turned into stories
Deviations, Patterns
105
How can data stories lead to positive risk management
Pay attention to positive deviations as much as negative ones
106
Future Trends in Risk Reporting
Advanced Analytics Real time reporting Integrated reporting Enhanced visualization

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