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Risk Event Classification Masterclass

The analysis, classification and management of risk event information (often referred to as “loss data”) remains one of the most difficult, most controversial and most error-prone aspects of formalised operational risk management. Ignoring for a moment the debate around the impact of the intended data use on the attributes to be collected, over time firms evolve their classification structures, change their collection and analysis processes, change database technology used to store the data and suffer from staff turnover, all typically resulting in classification fruit salad.

So, how can you avoid your painstakingly collected risk event information morphing into a fruit-salad which, while it may look good and may even satisfy certain regulatory requirements, is neither pure nor consistent?

To help firms answer this question and to share experience gained from developing industry leading classification taxonomies, from assisting numerous firms around the world manage their internal data and overcome these issues, from supporting several of the world’s recognised loss data consortia and from classifying and delivering public loss data to clients, RiskBusiness International offers its unique Risk Event Classification Masterclass, either as an inhouse course or for public enrollment.

Who Should Attend?

The Masterclass is ideal for all staff engaged in analysing and classifying risk events, as well as for audit, compliance and risk professionals who work with risk event data on a regular basis. Management at all levels would also benefit from an in-depth understanding of how events arise, evolve and are managed. Regulators, ratings analysts and underwriters would all gain a greater understanding of how firms that they are interested in deal with difficult classification issues.

The Masterclass will address the needs and requirements of financial services in general and is equally applicable to banking, insurance and asset/fund management. A number of non-financial services case studies will also be used, accordingly individuals from outside of the financial services industry may also find the Masterclass of interest.
‘classification fruit-salad’

How does it Work?

The Masterclass is restricted to a limited number of delegates, who will work together in groups under expert facilitation to analyse relevant case studies, explore various techniques and to share experiences. Expert input on a wide range of topics will precede each exercise, with a focus on learning through experience.

Facilitation

The Masterclass will be led by Mike Finlay, widely recognised as one of the world’s leading experts in operational risk management. Mike is the Chief Executive of RiskBusiness International Limited, has over 25 years experience in banking and finance and is a frequent lecturer on operational risk for banking supervisors at the Bank for International Settlements, as well as at industry conferences and seminars. Mike is a regular visiting lecturer on risk management at Judge Business School, Cambridge University, and has worked with the World Bank/IFC in the Russian Federation and across Eastern Europe, as well as with the Financial Services Volunteer Corps and the BIS’ Financial Stability Institute in ongoing risk management education and knowledge transfer in Europe and across Northern, Central and Southern Africa.

MASTERCLASS AGENDA AND CONTENTS

08h30      Registration, Welcome and Introductions
     
09h00   

Why Collect Risk Event Information?
➤ Different reasons for data collection.
➤ Different types of risk event.
➤ Uses for risk event information.
➤ Decomposition of a risk event.
➤ Video – what happened, why and how?
➤ Different perspectives on risk event information (the “bow-tie” model):
➤ The causal perspective ➤ The event perspective ➤ The effect or impact perspective
➤ The litigation perspective ➤ The accounting perspective
➤ Exercise – name the event – delegates will be provided with a series of clues about a well-known event and should use the clues to identify the event.

Common data attributes found in risk event information, their uses and how to best identify and classify each, taking into account the different rspectives on risk events:
➤ The concept of products/services and business activities/lines – why these attributes are possibly the mostcrucial of all data attributes, with a case study illustrating how to identify these attributes.
➤ The concept of process – the process(s) where the risk event arises and the process where it is discovered – how to use process information to remediate causal issues and for allocation purposes, with a case study illustrating how to identify these attributes.

     
10h30   Coffee and networking break
     
11h00    Continuation of common data attributes found in risk event information, their uses and how to best identify and classify each, taking into account the different perspectives on risk events:

➤ The concept of risk types (credit, market, strategic, operational, etc), risk categories and loss event types – why these should not be the major classification attribute, differences in classification structures for different forms of risk exposure and risk manifestation information, with a case study illustrating how to identify these attributes.
➤ The concept of causal factors, their use in “root cause analysis” and in “risk exposure assessment”, with a case study illustrating how to identify these attributes.
➤ The concept of control classification and its use in risk event information, with a case study illustrating how to identify these attributes.
➤ Delegate Debate – a facilitated debate between working groups as to which of the primary classification structures is the most important/useful/informative aspect.
➤ The concept of impact types – direct impact, indirect impact and recoveries – and how this information is used within risk events, with a case study illustrating how issues with these attributes can cause classification problems.
➤ Other supplementary classification attributes, such as geographic information, industry types, customer or client types, etc.

     
13h00   Lunch
     
14h00  

Practical issues:
➤ Examples of how inadequate or poor risk event classification can distort the firm’s action
➤ Common pitfalls in risk event classification.
➤ Delegate question time – delegates are encouraged to bring examples of particularly difficult risk events (anonymised) for group discussion and classification.

Extended Video and Case Study – delegates will watch an extended video of a well-known risk event, then work in groups to classify the event.

     
15h30   Coffee and networking break
     
16h00   Extended Video and Case Study (continued) – delegates will watch an extended video of a well-known risk event, then work in groups to classify the event.
     
17h30   Summary and Masterclass close