Monitoring and Reporting

Question 1

Why Report and what are the Basic Principles of Reporting?

Answer 1

Reporting leads to informed decision making in connection with risk management procedures. Reporting is a dynamic process; it should be timely, accurate and answer 3 questions:

1. What does the number mean?
2. Why is it at that level?
3. What should be done about it?

Question 2

How may a Report be Styled?

Answer 2

• As Dashboards showing high-level visual reports that summarise Key Performance Indicators
• Reports should be written for the ease and benefit of readers

Question 3

What do the Regulations require wrt Reporting?

Answer 3

The Basel Committee requires regular reports from business units and internal audit to show how risk management is complying with key controls.

Question 4

What is Internal Loss Data?

Answer 4

• Internal loss data compares a bank’s risk estimate to its actual loss experience.
• Internal loss data is at the heart of the Basel II and III Accords
• Tracking loss data is essential in a credible operational risk management system

Question 5

What must banks do wrt Internal Loss Data?

Answer 5

• Have a documented procedure for assessing historic loss data
• Map historic internal loss data into relevant level 1 categories
• Have a documented objective criteria for allocation losses to specific business lines

Question 6

What may External Loss Data be used for?

Answer 6

• Benchmarking
• Showing how a firm may cope with problems experienced by others
• Required by the Basel Committee