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Risk Audit




Risk in Financial Institutions

The concept of risk is commonly split into 3 different domains, generally handled by different people: market risk, credit risk and operational risk. Whereas credit risk is as old as banking and market risk has been taking more significance with the collapse of Bretton Woods agreement, an awareness of operational risk, let alone of holistic risks, is a relatively new concept to banking and related financial businesses.


Either accepted as a fact of life, ignored, or just hidden from public view, operational risk is with us to stay, admitted or otherwise. Although no operating definition is universally accepted, banks and financial institutions, under the Basle II accord, will have to convince their regulators that they measure, monitor and mitigate their operational risks. It would be a licence to waste money if a financial institution would implement their reading of Basle II by the letter, merely to please or pacify their regulator. However, how many institutions are far from this point?

We propose an assessment in which we can help an institution, beyond what is required or not by regulators, detect the operational risks incurred by the firm, and propose pragmatic solutions to deal with these risks. Operational risks can be a normal side effect of doing business, or the unseen consequences of ways of working, or even just phantoms that certain people like to see once in a while.

Objectives and methodology

Our categorisation of risk goes beyond the traditional, regulation-driven silos of market, credit and operational risks. We include in our assessment strategy risk and risks linked to corporate governance, so as not to be limited to “accepted” operations risk domain.

These investigations are designed to bring minimal disruption to the business, and to optimise not only the thought-provoking elements brought by a consultancy project, but also the post-intervention impact of our services. This brings, on top of helping in the compliance process and potentially reducing capital requirements, a new confidence into an effective risk management process, at a minimal cost and maximal improvement in handling operational risk.


-        collection of operational risk information, using formal questionnaires, interviews and existing formal documentation

-        inventory of the main operational risks

-        assessments of likelihoods and potential impact

-        investigation into past loss data

-        benchmarking

-        investigations into prevention and mitigation strategies

-        implementation of a loss database

Others (optional add-ons)

-        scorecard

-        blending of internal and external loss data

-        tail risks


-        risk assessment report

-        presentation of this report

-        risk grading

-        outline strategic recommendations


Generally, and depending upon the size of the institution and the depth of the investigation, this assignment takes from 1 man week (with 2 people) to 3 man months. However, every assignment, client and situation is unique, and necessitates a prior assessment before committing on a particular time frame.

The risk assessment phase is generally followed by a risk adjustment phase, in which a detailed strategy to address the identified risks is designed.


The Team

  • Expert consultants with many years of practical experience in risk businesses, including working directly for banks and securities firms and regulatory authorities, highly qualified with Ph.Ds and MBAs, and with years of relevant consultancy experience


For further information on this and our other consultancy services please contact us via risk_enquiries@value-consultants.co.uk or the contact details on our home page www.value-consultants.co.uk



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Last modified: July 30, 2003