Case Management in Financial Services
Overview
Cases management and tracking of issues, incidents, loss-events, frauds, exceptions and process deviations for regulatory compliance and ethics-related matters is one of the central functions of an organization's risk management groups. Basel II, the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision breaks down loss events into seven general categories including Internal Fraud, External Fraud, Employment Practices & Workplace Safety, Clients, Products & Business Practice, Damage to Physical Assets, Business Disruption & Systems Failures, Execution, Delivery & Process Management.
MetricStream solution streamlines information flow and issue tracking for effective risk assessment, compliance management and regulatory reporting. The system supports various CCO-level oversight programs, policies and procedure management, auditing requirements, recoding of trading errors, and compliance with Anti Money Laundering and Basel II regulations.
Case Management Resources
Basel II: Revised International Capital Framework
The Basel II Framework describes a more comprehensive measure and minimum standard for capital adequacy that national supervisory authorities are now working to implement through domestic rule-making and adoption procedures. It seeks to improve on the existing rules by aligning regulatory capital requirements more closely to the underlying risks that banks face. In addition, the Basel II Framework is intended to promote a more forward-looking approach to capital supervision, one that encourages banks to identify the risks they may face, today and in the future, and to develop or improve their ability to manage those risks. As a result, it is intended to be more flexible and better able to evolve with advances in markets and risk management practices.
The Risk Management Association
The Risk Management Association (RMA) is a member-driven professional association whose objective is to further the ability of our members to identify, assess, and manage the impacts of credit risk, operational risk, and market risk on their businesses and their customers. RMA provides education, networking and leadership opportunities for our membership.
News and Articles
Operational Risk
The Basel Committee (2004) defines operational risk as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. The committee indicates that this definition excludes systemic risk, legal risk and reputational risk.
A Tale of Tails: An Empirical Analysis of Loss Distribution Models for Estimating Operational Risk Capital
Operational risk is being considered as an important risk component for financial institutions as evinced by the large sums of capital that are allocated to mitigate this risk. Therefore, risk measurement is of paramount concern for the purposes of capital allocation, hedging, and new product development for risk mitigation. We perform a comprehensive evaluation of commonly used methods and introduce new techniques to measure this risk with respect to various criteria. We find that our newly introduced techniques perform consistently better than the other models we tested.
Bank Risk: Will Basel II Finally Discredit VAR?
Federal regulators plan to adopt Value at Risk or VAR models to measure banks' capital adequacy under Basel II's Pillar III, but critics note that this adoption could lead to the extinction of VAR models. According to critics, these models are woefully inaccurate because they fail to assess risks attached to specific transactions; and as implemented under Basel II, banks will be forced to benchmark these models against actual results. For example, a bank loosing about 3 percent in a given period when its VAR model suggested a 1 percent loss from total investment could signal to regulators that banks are unaware of the risks faced by their operations. Meanwhile, ratings agencies and sell side players contend that VAR models are tools that can improve leverage and allow banks to take on more risk because their overall exposure is lower. Some banking firms continue to develop additions to their VAR models to ensure that shortcomings are rectified, with Citigroup employing specified factors related to debt and equity risks.
