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RISK GOVERNANCE - Coggle Diagram
RISK GOVERNANCE
Corporate Governance Model
Purpose
facilitate accountability and responsibility for effective and efficient performance and ethical behavior
Approaches
Comply or Explain
→ the organization should comply with the requirements OR explain why it was not appropriate
Full Compliance
→ detailed requirements, expect detailed compliance and exceptions is not acceptable
Committees
Risk management committee
Audit committee
Disclosures committee
Nominations committee
Remuneration committee
OECD Principles of Corporate Governance
Effective corporate governance framework
Rights and equitable treatment of shareholders
Institutional investors, stock markets and other intermediaries
Role of stakeholders in corporate governance
Disclosure and transparency
Responsibilities of the board
Corporate Governance in a Bank
The legal and regulatory framework
Risk management
Capital management and group accounting
Human resources and compensation
Audit committee, internal audit and external audit
Communication, including branding
Corporate Governance for a Government Agency
Nolan Principles of Public Life
Selflessness → Holders of public office should act solely in terms of the public interest and should not seek benefits for themselves, their family or friends
Integrity → Holders of public office should not place themselves under any financial or other obligation to outside individuals or organizations.
Objectivity → In carrying out public business, the holders of public office should make choices on merit
Accountability → Holders of public office are accountable for their decisions and actions to the public and must submit themselves to appropriate scrutiny
Openness → Holders of public office should be as open as possible about all the decisions and actions that they take and give reasons for their decisions
Honesty → Holders of public office have a duty to declare any private interests relating to their public duties and to take steps to resolve any conflicts.
Leadership → Holders of public office should promote and support these principles by leadership and example
Evaluation Board Members
Membership and structure
Does the board have the necessary range of knowledge, skills and experience?
Is there appropriate turnover of board membership to ensure new ideas?
Are the sub-committees of the board effective, with appropriate delegated authority?
Are board decision-making processes satisfactory, with adequate information available?
Do communication processes exist between board members outside board meetings?
Purpose and intent
Do all board members understand and share the vision and mission?
Do members of the board understand the objectives and position statements?
Is there sufficient knowledge and understanding of the significant risks?
Are board members sufficiently involved with the development of strategy?
Have measurable budget and performance targets been put in place?
Involvement and accountability
Does the board have shared ethical values, including openness and honesty?
Are the established policies unambiguous and consistent with the ethics?
Do board members understand their duties, responsibilities and obligations?
Is there a feeling of mutual trust and respect at board meetings?
Are adequate delegation and authorization procedures in place?
Monitoring and review
Is there sufficient monitoring of performance using appropriate measurements?
Does the board challenge planning assumptions when and where appropriate?
Does the board demonstrate the ability to respond rapidly to changes?
Is there a mentality that demands continuous improvement in performance?
Does the board assess financial and other controls and seek assurance on compliance?
Performance and impact
Is there a satisfactory level of attendance at board, committee and other meetings?
Are board decisions and actions fully recorded and actions tracked and confirmed?
Are the agreed targets and performance indicators evaluated and assessed?
Is the impact of board decisions and actions evaluated in a timely manner?
Is there an emphasis on accuracy, honesty and open reporting to external agencies?
Stakeholder Expectations
CSFSRS
(Range of Stakeholders)
Customers
Staff
Financiers
Suppliers
Regulators
Society
Stakeholder Dialogue
General
A clear statement of strategy and vision
Corporate profile and principal markets
Financial Data
Annual report and financial statements
Archived financial information for the past three years
Corporate Governance and CSR
Information related to compliance with Combined Code
Information on the company CSR policies
Shareholder Information
Shareholder analysis by size and constituent
Information on directors’ share dealings
Relevant News
Access to all news releases and presentations
Developments that might affect the share value
Stakeholders and Core Processes
Stakeholders and Strategy
Stakeholders and Tactics
Stakeholders and Operations
Operational Risk Management
Basel II Types of Risk
Internal fraud, including misappropriation of assets, tax evasion and bribery
External fraud including theft, hacking and forgery
Employment practices and workplace safety
Clients, projects and business practices
Damage to physical assets
Business interruption and systems failures
Execution, delivery and process management
Basel II ORM Principles
The board is responsible for establishing the operational risk strategy
Senior management is responsible for implementing the operational risk strategy
Information, communication and escalation flows must be established.
Operational risks inherent in activities, processes, systems and products should be identified
Processes necessary for assessing operational risk should be established
Systems should be implemented to monitor operational risk exposures and loss events
Policies, processes and procedures to control or mitigate operational risks should be in place
Supervisors should require banks to have an effective system to identify, measure, monitor and control operational risk
Supervisors should conduct regular independent evaluations of these principles
Sufficient public disclosure should be made to allow stakeholders to assess the operational risk exposure and the quality of operational risk management
Basel II Alternative Approach
Basic indicator approach
→ calculates the value of operational risk capital using a single indicator for the overall risk exposure
Standardized approach
→ calculates the value for operational risk, using a broad financial indicator, multiplied by operational loss experience
Advanced approach
→ uses the internal loss data and a combination of qualitative and quantitative methods to calculate the operational risk capital
Project Risk Management
Respond to Project's Uncertainty
Accept the risk or uncertainty;
Adapt activities and procedures;
Adopt contingency plans and responses;
Avoid the risk or uncertainty
To be successful
Making risk management part of the project
Identifying risks early in the project
Communicating about risks
Considering both threats and opportunities
Clarifying ownership issues
Prioritizing risks
Analysing risks
Planning and implementing risk responses
Registering project risks
Tracking risks and associated tasks
Opportunity in Projects
Project Risk Analysis and Management (PRAM)
Benefit
Feasibility
→ at this stage the project is most flexible, enabling changes to be made that can reduce the risks at a relatively low cost.
Sanction
→ the client can view the risk exposure associated with the project and check that all steps to reduce/manage the risks have been taken.
Tendering
→ the contractor can ensure that all risks have been identified and that risk contingency or risk exposure limits have been set.
Post-tende
r → the client can ensure that all risks have been identified by the contractor and assess the likelihood of programmes being achieved.
During implementation
→ the likelihood of completing the project to cost and timescale will increase if all risks are identified and correctly managed
Supply Chain Management
Scope
strategic partnerships
joint ventures
support services
outsourcing of facilities management activities
Strategic Partnership
Joint Ventures
Outsourcing of Operations
Risk and Contracts
Level of the risk associated with the contracted service
Value of the contract for supply of goods or services
Duration and scope of the contract
Level of skill required in the delivery of the contracted services
Critical nature of the goods or services that are being contracted