Operational Risk and Advanced Measurement Approach
Financial services professionals, consultants, and sales professionals interested in providing or selling products and services to banks and other financial institutions, and everyone interested in knowing about credit and operational risk exposure to banks and capital requirements to cover those risks in the light of the Basel framework
Please contact us for information about prerequisites.
Basel regulations, specifically Basel II, establish principles and guidelines for banks to calculate their minimum capital requirements for credit, market, and operational risk. Operational risk represents the risk of financial loss resulting from inadequate or failed internal processes, people, and systems or from external events. Depending on the level of sophistication of individual banks, Basel II permits three methods for calculating operational risk capital charges: basic indicator approach, standardized approach, and advanced measurement approach (AMA). The AMA is the most sophisticated and risk sensitive of the three and allows banks to use their own method for assessing their exposure to operational risk provided they meet certain requirements set by Basel. A bank’s AMA would be obliged to make use of certain data elements, primarily taking into account internal loss, business environment, and internal control factors to create a reliable estimate of the operational risk capital charge. Banks should also have systems for regular validation and verification and should ensure successful development, implementation, and maintenance of the AMA framework.
This course presents a high-level view of the advanced measurement approach and Basel regulations for its successful deployment in banks. It recognizes types of AMAs and characteristics of AMA data elements. It then explains validation and verification as part of operational risk management framework and identifies key components of operational loss event valuation.
- identify characteristics of operational risk
- recognize types of advanced measurement approaches
- recognize characteristics of operational risk
Advanced Measurement Approach
- recognize characteristics of AMA data elements
- identify components of operational loss event valuation
- identify definitions of risk quantification and mitigation
- recognize aspects of validation and verification as part of the operational risk management framework
- recognize characteristics of the advanced measurement approach