Every socio-economic, political, legal, natural disaster, man-made disaster, or another process, which leads to a negative outcome must be recorded and taxonomized as an incident having material or near-miss risk characteristics, in the right category box in the risk register.
Modern #ERM & Traditional Risk Management are getting more and divided.
ERM is not just about Operational Loss Management and Materiality Assessment based on Assurance and Risk Review drove Internal Controls and Testing, but, it goes beyond that!
@IASassociation @TheIIA @BIS_org
More and more #Analytics is being used in both Auditing and Risk management, to understand the organizational dynamics of commercial strategy and the vulnerabilities associated thereof.
Especially the design, inserting and removal of Internal Controls is an analytical exercise.
KPIs Key Performance Indicators
KRIs Key Risk indicators
KCIs Key Control Indicators
All should be excogitated using #diagnostic, #descriptive, #predictive and #prescriptive #analytical processes and models.
Enter into BIG DATA, Data Science and Machine Learning, etc
Risk and Strategy should be tied together by appropriate controls.
Where you have a risk you have controls, and there you require random control testing.
Unfortunately, Control Testing is still a contested area between Auditing and ERM Desks.
Should it exist independently?
#ERM is proactive.
#Auditing is "mostly" Reactive.
#Internal #Controls monitoring should be done by the risk department or a go-between function that deploys, monitors and reports violations of controls both vertically and horizontally.
The 3-LOD Model does not work well!
In some Financial Institutions, such as Commercial Retail Banks, the MLRO in branches, do not report AML/KYC Control violations, because branch managers and RMs have to meet deposit targets.
That makes the first line of defence, the customer units, defunct and dysfunctional
In #private #banking and wealth management, I have come across terrible violations of internal controls. For e.g. the forms were not properly filled, the disclosures were not attached, the special lessons learned documents were not complied with, and the due diligence not done
SARs Suspicious Activity Reports should be a tick off for Compliance, Auditing & Risk professionals working at banks, etc.
These SARs should be counter checked at the branch banking level, by asking the RMs and the branch mngr to fill out #SRAC forms on a periodic basis
That's why it's important to have a fully functional ERM Desk/ Department which reports directly to the Board Risk Committee.
Never work as a risks manager at any firm, especially, at banks, or elsewhere within financial services, where the Board Audit Committee hijacks Risk Mgmt
Auditors, usually and mostly, are Accountants, who analyze gaps and internal control violations from an accounting embedded process.
Their lingua franca is debt and credit, etc
In the financial services industry, risks registers are no longer taxonomized using mundane acct terms
The definition of #Materiality might have conflicting connotations across the #GRC Silos.
Accountants define materiality using the IFRS and industry benchmarks.
Risk Professionals in terms of actual or potential losses?
Auditors either as cash or book loss or near-miss event?
e.g. Material Control violation for a Compliance Desk might be a manual violation of either any law, rule, procedure, process or specific regulatory instruction issued by the supervisor such as the SEC or the Central Bank, at a retail bank.
For the Risk Department, a Materiality posited event leads to the actual financial penalty, if regulatory instructions are violated.
non-quantifiable risks are usually considered to be immaterial and uncontrollable.
Hence, the materiality of risks lies in the eyes of the beholder.
Quantifiable->Measurable->Controllable->Material Risks->Financial Risks->Credit,Liquidity, Market, etc.
I dont want to discuss Exogenous and Endogenous Risks in this thread.
Operational Risks may or may not have quantifiable aspects?
Not all ORs are measurable.
Some Operational Risks have distinct frequency and severity occurrences, which further complicates the academic discussion.
Color Coded bars such as Heatmaps are basically all useless tools!
@BIS_org does not want banks to follow the AMA Advanced Measurement Approach to measure Operational Risks.
Banks are no longer required to compute Ops VaR!
Economic capital modelling for Ops Risk has been simplified.

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More from @SAH16928046

10 Aug

Quant Reading List C++ Programming

This post is part two of a series of reading lists for beginning quantitative analysts.
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This post is part of a series of reading lists for beginning quantitative analysts. Other posts in the series concentrate on C++ Programming, Numerical Methods and Python Programming.

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Read 4 tweets
9 Aug
#Bellicose #nations that continue to invest in non-productive activities such as buying conventional and unconventional #military #weapons, and technologies, do so at the peril of #Human #Development and Progress, are manifest from their poor performances in the #TokyoOlympics
Social accounting indicators such as health care, social care, medical provisions, insurance social risk transferences, old-age benefits, unemployment welfare benefits, education, public transportation, etc are used to measure human development and quality of life.
Why smaller nations tend to win more medals compared to opulent larger countries with wealth and manpower, is a subject that is being debated by sociologists and evolutionary biologists.
Its a complex topic
Read 4 tweets
3 Aug
Interviewed a fully qualified #actuary from the @SOActuaries professional body, who really impressed me!
It goes on to show that not all mathematically inspiring and charismatic blokes are dull at understanding the subtle qualitative aspects of business #risk and transactions.
Actually, I do offer my services as a recruiter aka professional headhunter and knowledge capital developer, in addition to teaching Talent Management at staff colleges across financial institutions
I often get twirled when I have to choose between Financial Engineers & Actuaries
Mostly, for Front Office Risk Management roles, Financial Engineers, Financial Mathematicians, and Quantitative Economics or Finance Risk, etc candidates get preference
For Middle Office and other Risk Sub-Silos Roles, Actuaries compete with other Quants coming from hard sciences
Read 14 tweets
3 Aug
You are no longer secure after investing your or your parent's money in education
Because of these new trends of hiring and firing people under zero-hour contracts, agile working spaces setup during the #pandemic, working from remote location, and #AI/ML #robots replacing humans
And, if you are an Overseas Student, please don't get lured by the work permit, professional practise programs that offer industrial placement, and other visa extension nonsense, as we see in different jurisdictions.
There is no guarantee that you will find decent paid work
Already, a friend of mine, who is working as a registrar of programs at a Middle East-based university, is receiving tons of CVs a day, from respected university lecturers, and researchers from top western institutions.
I guess PhD Scholars are pre-empting sacking orders.
Read 7 tweets
1 Aug
As I am growing older, I have started enjoying reading and appreciating certain aspects of the pessimistic philosophy of #Schopenhauer.
One has to read at least these philosophers to develop a broader understanding of society, logic and methods of enquiry->
1. Hume
2. Descartes
3. Hegel
4. Marx
5. Schopenhauer
6. Kant
7. Wittgenstein
8. Berkeley
9. Isaiah Berlin
10. AJ Ayer
11. Anthony Kenny
12. Nietzsche
Of course, the list above is expandable.
I cannot write the names of all philosophers, logicians, and methodologists in one tweet.
Yes, Anthony Quinton, P.F. Strawson, Quinne, David Donaldson and Amartya Sen (Philosophy of Economics) can be added to the suggested reading list.
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1 Aug
I have visited Singapore many times! this country is really a role model for all nations of the world, irrespective of size.
The size issue has been used by economists and development specialists to malign some of the most outstanding achievements of PAP Led by Lee Kuan Yew, who in my opinion was a true king philosopher.
Singapore is both small and efficient! But, its small size should not be used to downgrade its phenomenal growth in economic and anthropological terms!!
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