Back to Case Studies

Client Requirement
The Basel II Capital Accord is compelling large internationally active banks to see operational risk more closely than before. By formally introducing operational risk into risk management and capital calculation, Basel II is moving these institutions to explicitly identify, measure and report information related to operational risk. Many smaller banks and non-bank financial institutions are following suit. Yet precisely what Basel II will require remains a work in progress. Institutions are being directed to meet compliance deadlines as regulations are still being written, leaving them uncertain whether the approaches they take, and the expenditures they make, will ultimately pass. Basel II calls for institutions to employ more advanced approaches to operational risk identification, measurement and reporting, but precisely what the accord will require remains a work in progress. Barclay’s Capital is the investment banking arm of Global Bank Barclay’s. The top management of the client felt an immense need for the operational risks to meet the obligations of Basel-II regulatory needs as well as there was a true feeling by the management that putting together a operational risk framework not only satisfies the regulatory need but also helps the business for sustained growth. In today’s business environment — the business of the bank is increasingly global in nature and more competitive than ever before — the failure to properly recognize and manage risk can undermine the strategic intents of the enterprise. The ability to recognize and manage risk effectively not only helps a company meet its many obligations and goals, but a thoughtfully planned and well-executed risk management approach can also give a company a decisive edge over its competitors.

Solution Implemented
Z&A’ s Enterprise Risk Management (ERM) framework offers a comprehensive and effective approach for business leaders seeking to better assess, monitor, manage and mitigate business risk. Z & A helped the bank establish a project governance structure, including obtaining executive-level support and creating a Basel II project office for operational Risk. This helped the bank to gather data quickly from various business units and assess the major losses in various business processes by quantifying them. A separate centralized team of risk evaluators were actively evaluating the reported loss incidents and the matter was reported to the respective business unit heads on daily basis. Barclay’s Operational risk management analysts and managers were closely monitoring the daily incidents which in turn helped to develop ample controls and remediation measures to streamline the related business processes. In addition, we worked with the bank to establish a communication strategy and define the high-level test and training approach for the implementation.

Benefits

• A successful implementation of Enterprise wide operational risk management framework.
• Better management of operational risk and capital allocation.
• Reduction of operational loss, lower compliance and auditing costs.
• Early detection of unlawful activities.
• Reduced & consolidated exposure to future operational risks.

Back to Case Studies