Chapter 29: Operational & other risk management

Question 1

Components of best practice ops risk management EQ AID

Answer 1

• EWTs
• Quantitative and qualitative assessment tools
• Allocation of capital to operational risk
• Insurance function integrated into operational risk
• Defining operational risk consistently

Question 2

Actions of managing ops risk HELP TOUCH DIRCO D

Answer 2

• Horizon scanning
• Education
• Lobbying and legal awareness
• Product design and pricing
• Tech maintenance
• Outsourcing – FINES C
• Underwriting
• Continuity and crisis management
• HR practices improved CARR
• Due diligence – FINES C
• Integration of frameworks into business
• Relationship management
• Change management
• Organizational structure improvement
• Data and model management CLAUD

Question 3

Components of Continuity and crisis management RED

Answer 3

o Reputational management
o Exploiting opportunities & minimizing losses
o Data management and other important assets

Question 4

Components of HR practices improved CARR

Answer 4

o Competency management – training & testing
o Appraisals and performance review
o Recruitment process
o Relationship management – employees and unions

Question 5

Improving Data and model management CLAUD

Answer 5

o Checks on data
o Limitation entry fields for data
o Audit trails
o Usage of models of purpose
o Documented processes

Question 6

Considerations when managing liquidity risk CAT TROT

Answer 6

• Cost of transfer
• Accounting
• Transferability of funds
• Timeliness
• Regulatory barriers
• Overseas transfer
• Tax implications

Question 7

Ways to manage liquidity risk DISCAM

Answer 7

• Diversify funding sources
• Investment strategy varied
• Swaps
• Contingency fund and finance sources
• Additional capital raising ability monitored
• Monitor liquidity limits

Question 8

Actions to prevent feedback/contagion risk BAG SPEC

Answer 8

• Business types separated
• Additional reserves set up – regulatory requirement
• Government bailouts
• Suspend stock market trading when spikes happen
• Pro-cyclical regulations avoided
• Exchange traded investing – diversify counterparty risk
• Counterparty risk limits

Question 9

Ways to cater for demographic risk PEN D TECH

Answer 9

• Pricing according to risk
• Exclusion clauses
• No claims discount
• Diversification
• Transfer risk
• Excesses charged
• Concentration limits
• Hedging

Question 10

Ways to manage change management REP

Answer 10

o Requirement clearly defined
o Easy to maintain and use systems
o Pilot studies