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RIESGO OPERACIONAL - Coggle Diagram
RIESGO OPERACIONAL
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Many large multinational corporations and financial institutions have centralized trading, risk management, or treasury operations. These oper- ations manage regional, or in some cases worldwide, exposures by netting hedging and liquidity requirements among members of the group.
Centralization has certain advantages, including the potential to reduce transaction costs associated with hedging.
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Internal Controls
An adequate, effective audit program, monitoring, and a clear audit trail, in part derived from appropriate processes and reporting, is also critical.
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Management Involvement
Involvement of key management, as well as internal and external audit professionals, can also offer guidance in the area of controls. Management must have an appropriate level of knowledge about organizational risks to develop policies and acceptable strategies and moni- tor compliance.
Conflicts of Interest
Management should be aware of the potential for conflicts of interest. If staff are influenced to transact business with certain institutions, these influences may have an impact on the independence of decisions made by staff.
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Monitoring Exposures
An important operational activity is to monitor exposures. It is important to keep up to date with market or regulatory changes that might affect a currency’s convertibility or liquidity, especially for emerging-market currencies.
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Risk Oversight
The board should have a good understanding of the financial risks faced by the firm, provide leadership in the development of policies to measure and manage those risks, and ensure that management executes the plans quickly and effectively.
Methods to manage operational risk include clear financial risk management policy, documentation of
policies and procedures, adequate risk oversight, and segregation of duties.
Employee compensation, education and training, holidays, and job rotation policies are also important.
Analysis of previous significant losses suggests that losses often occur as a result of one or more major problems:
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Operational controls:
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• Implement appropriate policies and procedures, including limits, controls, and reporting requirements. These should be documented.
• Set up an independent risk management function to ensure that policies and limits are not violated and to provide oversight to management.
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• Include an administrative or support function that can independently price and report on transactions, if no risk oversight function exists.
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Accounting practice
We all need to have accounting paractices in orther to register our money in properly form for the law and for our bussines.
Disclousures
• Information about management’s attitude to financial risks, how instruments are used, and how risks are monitored and controlled
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• For dealers only, additional information about the extent of financial instrument
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Arises from the possibility of fraud, error, or system or procedural problems
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Credit enhancement:
This means that you are upgrading your credit profile to have the chance of have more credist and biggers than the past.
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Risk management associations and organizations provide education, and in some cases certification, ranging from introductory to highly specific.
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Merger and Acquisitions:
Merger and acquisition situations present specific operational risks that need to be managed, not only during the often-lengthy transition phase but also after the transition is completed.The additional risks arise from the fact that it is more difficult to manage risk across an organization that might be geographically distant and involve various systems.
Fundamental Principles
- Document foreign exchange policy.
- Hire well-qualified, experienced personnel.
- Centralize foreign exchange trading and risk management.
- Adopt uniform foreign exchange accounting procedures.
- Manage foreign exchange forecast error.
- Measure hedging performance.
Trading-Volume-Related Principles
- Segregate the back office function.
- Manage counterparty risk.
- Buy derivatives competitively.
Risk-Appetite-Related Principles
- Use pricing models and systems.
11.Measure foreign exchange risk.
- Oversee treasury’s risk management.
Recommendations
- The role of senior management.
- Marking to market.
- Market valuation methods.
- Identifying revenue sources.
- Measuring market risk.