We will use the COSO Enterprise Risk Management Framework as the basis for assessing enterprise risk management within the context of overall governance and risk management. The COSO Framework embodies:
Appropriate culture, organisation structures and management practices are in place so as to embed credit risk management.
Enterprise risk management is integrated into strategic planning and is linked to the realisation of business objectives.
Mechanisms exist to systematically identify events which incorporate risks and opportunities across the organization.
Mechanisms exist to appropriately assess identified enterprise risks.
Mechanisms exist to determine the most appropriate responses to identified enterprise risks.
Appropriate controls are in place to implement enterprise risk responses.
Information and Communication
Processes are in place which enable the flow of relevant, timely and accurate enterprise risk-related information across the organisation.
Processes are in place to monitor the effectiveness of the enterprise risk management framework.
ERM incorporates a range of business activities, supported by conceptual models and frameworks, for integrating and coordinating risk management and control activities across the entire organization.
- Establish Goals and Objectives.
- Risk Governance: Establishment of approach for developing, supporting, and embedding the risk strategy and accountabilities.
- Risk Assessment: Identifying, assessing, and categorizing risks across the enterprise.
- Risk Quantification & Aggregation: Measurement, analysis, and consolidation of enterprise risks.
- Risk Monitoring & Reporting: Reporting, monitoring, and assurance activities to provide insights into risk management strengths and weaknesses.
- Risk & Control Optimization: Using risk and control information to improve performance.
VAR (Value at Risk)
The main purpose of the modeling capital is to be able to make a loss probability distribution function for each category of risk, business lines and products from the bank. Loss probability distribution function represents the total exposure to the bank and it consists of 2 main event expected loss and unexpected loss of data components that are usually regarded as statistically tail.
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