Ways of applying operational risk management in banks

The banking sector should rank foremost among the many sectors of the economy that have undergone drastic changes in the last couple of decades or so. The convergence of two colossal factors – globalization and the development of technology – has made inroads into the banking sector, impacting it with a force that was seldom seen earlier.

The number one area of the banking sector to be affected by these changes is operations. Many factors such as credit, software, etc. need to be regulated for their risks. However, the core of the banking sector is operations. Because of this, operational risk management in banks is the highest priority for banks.

The Basel Accords

risk-operational

 

The primacy of operational risk management in banks can be understood from the fact that one of the most important regulations aimed at the banking sector, the Basel Accords, a series of plans to regulate the banking sectors around the world; has operational risk management in banks on top of its agenda. Operational risk management in banks is one of the four areas identified at the second of these conferences, Basel II, the others being regulations concerning capital allocation, disclosure requirements and regulatory arbitrage.

operationalRiskManagementInBanks

Operational risk management in banks according to Basel

The Basel Accord takes a very comprehensive view of operational risk. It describes operational risk as loss that can occur from a variety of reasons, all of which are linked to the core banking structure. The Basel Accord sees risk as something that can happen from any of the operations concerning the bank. It requires operational risk management in banks to take all of these factors into consideration before arriving at solutions to prevent loss from these operations.

pentaho

From the Basel Accords perspective, operational risk management in banks need to take into consideration the following events and identify all of these in identifying frauds and losses:

Internal fraud

Any fraud from any of the bank’s employees, insider trading, false reporting of profits are among the kinds of activities listed by Basel as being part of internal fraud.

External fraud

External fraud can happen from a number of sources. It could be robbery, burglary, hacking of security systems or check bounce. These are part of operational risk management in banks.

Employee fraud

Employees can be a major source of bank fraud. Steps towards mitigating actions from employees that endanger the functioning of the bank constitute a major step in operational risk management in banks.

Other kinds of frauds

Operational risk management in banks has to also take other sources of fraud. These can be from wrong entry of accounts, improper documentation for credit or loans, etc.

Ways of applying operational risk management in banks

Basel II has suggested methods which banks can take to apply risk management in their sector. These include:

operationalRiskManagementInBanks

Advertisements

Finance chiefs say bitcoin is ‘real’ but many think it’s in a bubble right now

Bitcoin is a “real” asset but it’s currently in a bubble, according to a CNBC survey of global finance bosses, with many calling it a “fraud.”

Ninety-seven chief financial officers (CFOs) on CNBC’s Global CFO Council were asked their view on bitcoin. Out of the 43 that responded, 27.9 percent said the cryptocurrency is “real but in a bubble.” Another 14 percent said that bitcoin is “real and still going higher.”

Meanwhile, 27.9 percent said bitcoin is a “fraud” while 30.2 percent of CFOs said they don’t know enough about the digital currency to have an opinion.

Of the finance chiefs based in Europe, the Middle East, and Africa, 41.7 percent said that bitcoin is “real but in a bubble” compared to 20.8 percent in the U.S. and 28.6 percent in the Asia Pacific region. A third of respondents in EMEA also think bitcoin is a “fraud,” higher than their counterparts in the other regions across the world.

Karim Hajjar, chief financial officer of Solvay, and a member of CNBC’s Global CFO Council said, that the “jury is out on bitcoin.”

“It’s not a currency we are using for a multibillion dollar business … it’s something we are curious about, we are very very open to, but we haven’t found a way to really integrate it into our business,” Hajjar told CNBC in a TV interview on Tuesday.

“If a hypothetical customer comes to us and says, ‘I have a bunch of bitcoins to buy your products,’ first thing I’ll probably want to do is not turn them away but probably find a way to sell those bitcoins before I commit to the order and then really make sure we meet the needs of that customer.”

Bitcoin hit an all-time high on Sunday, breaking above the $8,000 mark for the first time ever. The price of the cryptocurrency is up over 700 percent this year.

The rapid rise of bitcoin has sparked fierce debate over the the future of the digital currency. JPMorgan Chase CEO Jamie Dimon famously called bitcoin a “fraud” and said anyone who buys it is stupid. UBS meanwhile called bitcoin a “speculative bubble.” And regulators have also been keeping an eye on bitcoin with some clamping down on trading. China recently banned cryptocurrency exchanges.

Click here to continue http://snip.ly/4074e

HDFC Bank offers virtual accounts to PayZapp users

HDFC Bank will soon start offering digital savings bank accounts, credit cards and instant loans to users of its PayZapp app. The bank also plans to enrol additional merchants for acceptance of electronic payments to increase its present network of 1.2 million shops to 5 million in 18 months.

PayZapp, which was launched two years ago, has more than 14 million users. Over half of these are young users who do not have a bank account. “We are marrying a lot of our strategies by integrating changes that are happening in the market into our own business activity.

HDFC Bank is already a scale player in cards and loan assets. We will use our digital back-end strengths in these businesses to bring more scale into PayZapp,” said Parag Rao, group head for marketing, credit cards and payments business.

According to Rao, PayZapp has the potential to become a 50-million customer franchise with capability for instantly opening accounts and offering credit cards and loans.

HDFC Bank is already the market leader in credit cards with over 1 crore in circulation. It currently issues 2.5 lakh new cards every month. The PayZapp platform is expected to take this to 5 lakh a month. The offered savings account will be a completely digital product and the credit cards virtual, with an option to receive the plastic version. The instant loans would be powered by fintech (financial technology). “Fintech lending is the new kid on the block, which has brought a different way of  sourcing customers for loans,” said Rao.

For more click to continue http://snip.ly/g0xnn

Companies continue to increase transparency of external audit oversight

More companies are providing investors and other stakeholders with information about audit committee oversight of external auditors, according to the latest edition of the Audit Committee Transparency Barometer, an annual report released Wednesday by the Center for Audit Quality (CAQ) and Audit Analytics.

“For the fourth year in a row, audit committees have continued to enhance transparency around their oversight of the external auditor by voluntarily and broadly increasing disclosure,” Cindy Fornelli, executive director of the CAQ, said in a press release. The CAQ is affiliated with the AICPA.

The barometer found that 37% of S&P 500 companies’ proxy statements included enhanced discussions of the factors audit committees considered in recommending the appointment of the external audit firm. That’s up from 31% in 2016 and 13% in 2014.

The analysis, which also looks at mid-cap and small-call companies in the S&P Composite 1500, found that 24% of S&P MidCap 400 companies and 17% of S&P SmallCap 600 companies provided enhanced discussion of audit committee considerations in choosing an audit firm. Those percentages are up from 10% and 8%, respectively, in 2014.

to continue the article http://snip.ly/yrkko

Misinterpretation of closed Data when Treated with “Normal” Statistical Methods

Geology is among the many branches of science in which compositional data (CoDa) arise naturally. In branches such as geochemistry, compositional data seem to occur typically, when one normalizes raw data or when one obtains the output from a constrained estimation procedure, such as percentages, ppm, ppb, molar concentrations, etc.

Compositional or constrained data have proved difficult to handle statistically because of the awkward constraint that the components of each vector must sum to unity. The special property of compositional data (the fact that the determinations on each specimen sum to a constant) means that the variables involved in the study occur in constrained space defined by the simplex, a restricted part of real space.

It is important for geochemists and geologists in general to be aware of the fact that the usual multivariate statistical techniques are not applicable to compositional data. They need to have access to appropriate techniques as they emerge and become available.

Pearson was the first to point out dangers that may befall the analyst who attempts to interpret correlations between Ratios whose numerators and denominators contain common parts. More recently, Aitchison, Pawlowsky-Glahn, S. Thio, and other statisticians have developed the concept of Compositional Data Analysis, pointing out the dangers of misinterpretation of closed data when treated with “normal” statistical methods.

Learning about all elements of CoDa

A webinar from Compliance4All, a leading provider of professional trainings for all the areas of regulatory compliance, will throw light on all the important aspects of CoDa. At this session, Ricardo Valls, a professional geologist with thirty years in the mining industry, and who has extensive geological, geochemical, and mining experience, managerial skills, and a solid background in research techniques; will be the speaker.

To gain insights into CoDa, please enroll for this webinar by visiting  real case studies developedreal case studies developed

At this session, Ricardo will present several real case studies he has developed, to demonstrate the advantages of applying various aspects of the CoDa analysis in the search for and evaluation of ore bodies by comparing them with regular statistical modelling of geochemical data.

At this webinar, which will be of high value to personnel involved in mining, such as Geologists, Geochemists, Exploration Personnel, Graduate Students, and Post-Graduate Students; Ricardo will cover the following areas:

o  History of the Problem

o  The Current Situation

o  The Model

o  Normal Statistical Processing of the Data

o  Compositional Data Analysis

o  Factor and Principal Component Analysis

o  Dealing with zero and b.d.l. Values

Conclusions and Recommendations.

For more click the advantages of applying different aspects

Shockingly few Americans are putting money in a 401k

There’s a lot of hoopla surrounding President Trump’s new tax plan, which is reportedly considering capping pre-tax 401(k) contributions at $2,400 a year , a far cry from the current maximum contribution of $18,000 for 2017, and $18,500 for 2018 .

But the reality is this: Two-thirds of Americans aren’t even saving money in a 401(k) , let alone maxing out their contributions each year.

In fact, according to data from Vanguard, just 4% of people earning below $50,000 a year max out their 401(k) at the current limits, and 11% of people who make between $50,000 and $100,000 do. People making over $100,000 are the most likely to max out their 401(k), perhaps unsurprisingly, with 32% making the highest allowable contribution.In some versions of the rumored tax proposal, additional retirement savings would still be possible, but would be directed to a post-tax Roth 401(k) instead, reports Business Insider’s Lauren Lyons Cole .

Roth 401(k) contributions are deducted from your paycheck, just like traditional 401(k) contributions. Both types of accounts share the same maximum contribution and investment options. The only difference is when you pay taxes.

Saving in a traditional 401(k) is cheaper today because it allows you to postpone paying taxes until you begin taking withdrawals in retirement. That’s one reason financial professionals like the account so much – theoretically, people will put more money into the account if it takes less of their paycheck to do so.

And yet, only 41% of workers are saving in a 401(k) at the 79% of American companies that offer a plan to employees, Bloomberg reported earlier this year.

Roth 401(k) contributions are deducted from your paycheck as well, but the amount is funded with your take-home pay instead. Meaning, for every $1,000 you save for retirement, you’ll have to fork over $200 or so to the IRS $200, depending on your tax bracket .

http://snip.ly/46g7k Continue the article by clicking.

Ukraine Will Pursue Hard Reforms This Fall, Finance Minister Says

After a week of back-to-back meetings in Washington, Oleksandr Danylyuk is tired. He gladly downs a cup of coffee before we turn on our microphones to discuss Ukraine’s economy. The affable forty-two-year old finance minister is one of the few reformers left in Ukraine’s Cabinet of Ministers and has a reputation as a doer. He’s in town for the International Monetary Fund’s and World Bank’s annual meetings.

When Danylyuk took over after Natalie Jaresko stepped down in April 2016, expectations weren’t high, but he has exceeded everyone’s expectations. My colleague Anders Åslund captured it well: Danylyuk has “turned out to be the reform anchor in a government that has been less committed to reform than the previous government, and he has managed to keep the state finances in good order.”

The former investment banker managed to render elusive value-added tax refunds automatic, which pleases many foreign businesses, and has presided over a period of modest economic growth. In September, Ukraine returned to the international finance markets with the introduction of a $3 billion Eurobond, and analysts expect that there may be more offerings. Ukraine’s macroeconomic indicators are good, and Danylyuk has become one of the more convincing reform voices within the government—and someone that Ukraine’s formidable civil society actually respects.

Continue to full article http://snip.ly/26bcq