Diploma in Operational Risk Management

Course Syllabus

Operational Risk Management - Credit Value: 0.5

Aims

General Aim

To develop a n ability to apply knowledge and understanding of business and management by critical analysis, evaluation and synthesis of complex issues in order to understand the operational risk function, how risk is defined, identified, assessed, monitored and reported.

Specific aims

1. To provide students with an e xtensive, detailed and critical knowledge and understanding of what risk is and how it can be identified and monitored.
2. To allow students to develop effective problem solving and decision making skills using appropriate quantitative and qualitative skills including identifying, formulating and solving business problems and assessing, managing, reporting and mitigating risk.
3. The ability to create, evaluate and assess a range of options together with the capacity to apply ideas and knowledge to a range of situations in the financial services industry, and using this knowledge to understand how business continuity procedures can be built.

Content

1. Background

Defining operational risk
Key elements of operational risk
Business continuity management
Organisation and delivery
Establishing responsibility and accountability
Responsibilities and delivery across the organisation
Operational risk management lifecycle
The benefits of operational risk management
Key industry developments

2. Risk Management Process - Identification

What is risk identification?
Tools and techniques
Other techniques
Benefits of risk identification

3. Risk Assessment

The purpose of risk assessment
Cause and effect
Probability
Probability and relative frequency
Combined probability
A methodical risk assessment approach - steps and techniques
Other assessment techniques
The benefits of risk assessment
A caution

4. Risk Mitigation

Risk mitigation options
Risk avoidance
Risk sharing
Risk transfer
Risk acceptance
Risk reduction
Risk retention
Control measures
Control system
Control activities
Control process
Corporate governance
Benefits of risk mitigation

5. Monitoring and Reporting

Benefits of monitoring and reporting
Regulatory requirements
What should be monitored?
How should you monitor?
Loss data analysis
Who should you report to and why?
How should you report?
Event reporting
Risk appetite/tolerance

6. Responsibility for the Management of Operational Risk

Procedural and rule-based controls
A risk-based management approach to controls
Good risk management and internal control
The individual
The business
The risk function
Senior management
Internal audit
External audit (and other external influences)

7. Business Continuity Management

What is business continuity management?
Business continuity policy
Crisis management
Industry and regulatory context
Business continuity management programme
Responsibility for business continuity management
Business continuity management regulatory issues

8. UK Regulatory Environment

Self regulation
Statutory regulation
Governmental policy
Corporate governance
The FSA's objectives Risk-based capital
Basel 2
Pillar 1: Capital requirements
Pillar 2: Supervisory review
Pillar 3: Market discipline
Quantifying operational risk
Financial groups directive (FGD)

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Money Laundering - Credit Value: 0.5

Aims

General Aim

To provide an extensive, detailed and critical knowledge, understanding and the skills required tohelp bankers to identify and combat money laundering, and to give a full understanding of the regulations surrounding anti-money laundering procedures.

Specific Aims

1. To develop an extensive, detailed and critical knowledge of what money laundering is, and how it works.
2. To help bankers learn to develop the skills, techniques and practices used in the identification of possible cases of money laundering.
3. To give bankers a detailed and critical understanding of the regulations around money laundering.
4. To create a range of skills, techniques and practices relevant to the procedures which can be used to fight money laundering.

Content

1. Introduction to money laundering

Definition of money laundering.
Background to money laundering and legislation that seeks to limit criminal behaviour.
Overview of the money laundering regulations and their scope.
International perspectives - European and global legislation.

2. The money laundering process

Common methods of 'cleansing' money obtained through illegal activity through the financial services system.
Stages of the money laundering process.
Danger signals for financial institutions.

3. The Anti-money laundering framework

The Financial Services Authority and the money laundering sourcebook.
The Proceeds of Crime Act and the regulations made thereunder.
Relevant businesses.
Money service operators and high value dealers.
Registration requirements.
Powers of the Commissioners.
Organisational and personal liabilities.
Penalties.
Civil liabilities.

4. Anti-money laundering procedures

Money laundering policies, procedures and systems.
Identification procedures.
Record keeping responsibilities and notification requirements.
Internal reporting.
Initial and ongoing training responsibilities.

5. The compliance function

The role, responsibilities and duties of the Money Laundering Compliance Officer.
The duties of the manager and the individual.
Internal audit, internal checking and control.

6. Enforcement

Powers of entry and inspection.
Access to information by enforcement bodies.
Rights of search.
External reporting responsibilities.
Penalties for non-compliance with the regulations.
The National Criminal Intelligence Service (NCIS).

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Financial Crime - Credit Value: 0.5

Aims

General Aim

To provide an extensive, detailed and critical knowledge, understanding and the skills
required to help bankers to identify and combat financial crime.

Specific Aims

1. To develop an extensive, detailed and critical knowledge of what financial crime is,
   and how it works.
2. To help bankers learn to develop the skills, techniques and practices used in the
   identification of possible cases of financial crime.
3. To give bankers a detailed and critical understanding of the regulations around
   financial crime.
4. To create a range of skills, techniques and practices relevant to the procedures which
   can be used to fight financial crime.

Content

1. Types of Financial Crime

1. Sources of risk - customers, staff and third parties
2. Forgery, theft and fraud
3. Physical and other security risks
4. Risks arising from information technology and information systems:
   - Money laundering
   - Hacking
   - Virus contamination and other computer integrity violations
   - Identity theft
   - Phishing
   - Phishing trojans
5. Risks arising from transactions in financial markets:
   - Market abuse
   - Market manipulation
   - Insider dealing.
6. Professional liability and misconduct.
7. The impact of financial crime on financial institutions, the economy and society.

2. Legislation

Legislative overview including:

• The Bankers Books Evidence Act
• The Criminal Justice Acts
• The Proceeds of Crime Act
• The Computer Misuse Act
• The Financial Services and Markets Act.

3. Regulation

1. The role of the Financial Services Authority
2. The FSA's risk-based approach to fighting financial crime
3. Obligations of financial institutions under the FSA regulatory framework and
   other legislation
4. The FSA Handbook and provisions of relevant sourcebooks

4. Policy, Practice and Procedures

1. Corporate governance
2. Codes of best practice
3. Policy statements
4. Audit committees
5. The control cycle
6. Internal audit, internal financial control and internal check
7. Management and staff fidelity
8. Fraud and other crime prevention measures at tactical and operational levels
9. Systems reliability, electronic commerce
10. The role of external auditors

5. Enforcement

1. The role of the FSA
2. The National Criminal Intelligence Service

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Management Strategy and Leadership - Credit Value 1.0

Aims

General Aim

To provide the student with the ability to apply the principles of strategic management and leadership by critical analysis and evaluation of their working environment.

Specific Aims:

1. To provide an insight into the organisation and the role of the manager and leader therein.
2. To give an understanding of the role of strategic management within the organisation, incorporating strategic change, strategic analysis and strategic choice.
3. To develop an ability to apply knowledge and understanding of management and leadership by critical analysis, evaluation and synthesis of complex issues.
4. To create a range of skills, techniques and practices in financial services management at a professional level.

Content

1. The Organisation and the Manager

Definition of the Organisation
The Role of the Manager
Management v. Leadership
An Historical Perspective on the Study of Management

2. Managing Individuals and Teams

The Role of Groups in the Organisation
Motivation
Communication
Human Resource Management
Organisational Culture
Conflict
Change Management

3. Leadership

Definition of Leadership
Theories of Leadership

4. Themes in Management

Managing Different Cultures
Managing Quality
Social Responsibility and Ethics
Enterprise and Innovation

5. The Strategic Management Process

The nature of strategic thinking
Strategic management and operational management
Corporate strategy and business unit strategy
Development of strategy

6. Organisational Mission and Objectives

Business definition and organisational mission
Strategy and organisational culture
Strategy and organisational structure
Hierarchy of objectives
Organisational objectives
Relationship with operational objectives

7. Strategic Change

The nature of strategic change
The management of strategic and cultural change
The styles of managing strategic change
Drivers of strategic change

8. Strategic Analysis

The external environment appraisal
Market, industry, customer and competitive analysis
The internal resource and capability appraisal
SWOT analysis
Sources of competitive
Expectations and purposes

9. Strategic Choice

General strategies
Types of generic strategy alternatives
Strategy development
Entrepreneurial approaches to strategy
Evaluating strategic options

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The Compliant Person and Regulatory Risk - Credit Value: 0.5

Aims

General Aim

To provide financial services practitioners with an extensive, detailed and critical knowledge and cognitive skills of critical thinking, analysis and synthesis required under the FSA's compliant person regime, and to develop skills in ethical thinking.

Specific Aims

1. To gain an extensive, detailed and critical knowledge and understanding of the financial services regulatory framework and the changing context in which it operates.
2. To give students the ability to apply ethical thinking by critical analysis, evaluation and synthesis of complex issues
3. To engender enhanced personal development so as to be able to work with self-direction and originality and to contribute to the financial services sector and society at large
4. To provide students with the cognitive skills of critical thinking, analysis and synthesis required to help them make ethical and compliant decisions.

Content

1. Law, regulation and ethics - their role in financial services

The need for regulation and supervision of financial institutions.
Background to financial services regulation and supervision.
History of legislation affecting banks, building societies, insurance companies and other types of financial service.v Self-regulation and voluntary standards.
Ethics and social responsibility.

2. Regulation

Purposes and scope of regulation.
Principal laws affecting financial services authorisation, operations, marketing of services and personal accountability, including:

• Financial Services and Markets Act 2000 and regulations made thereunder;
• legislation relating to data protection, money laundering, consumer credit, health and safety at work.

Regulatory compliance.
Implications of legislation for the individual.

3. Common law accountabilities

Responsibilities under contract law and tort/delict.
Professional negligence and legal remedies.
Implications for the financial services provider, the individual and the customer.

4. Codes and statements of practice

The main codes and statements of practice affecting financial services providers, including the Banking Code and statements of practice affecting transparency, promotion and selling.
Implications of codes and statements of practice for the financial services provider, the individual and the customer.

5. Complaints and compensation

Internal processes for handling complaints.
External/independent complaints handling bodies.
The Financial Ombudsman Service.
Arbitration.
The role of the courts.

6. Ethics

Definition of ethics.
The importance of ethics in financial services.
Fiduciary responsibility.
Levels of accountability:

• supranational sources of authority;
• national and local laws;
• regulations;
• codes and statements of practice;
• policies, procedures and best practices;
• informal standards.

The shortcomings of legislation and the market system and the need for ethical standards.

7. The ethical environment

Ethics based on consequences of actions.
The utilitarian perspective.
Ethics based on duty and moral rules.
Human rights.
Social norms and attitudes.
Theories of ethics – Bentham, Ansoff, Cyert and March.
Social responsibility and societal responsibility.

8. Stakeholders

Definition of stakeholders.
External, connected and internal stakeholders.
Conflicts in objectives of stakeholders.
Balancing the organisation’s responsibilities to stakeholders.
Implications for the financial services provider and the individual.

9. Ethical problems facing the individual

Conflicts between organisational objectives, such as maximising shareholder value, and broader accountabilities to the customer, the community and society as a whole.
Personal ethical behaviour.
Ethical and other standards laid down by professional bodies.

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UK Financial Services, Regulation and Ethics (ApEx 1)

• U1 . The purpose and structure of the UK financial services industry
• U2 . The main financial asset classes and their characteristics, covering past performance, risk and return
• U3. The main financial services product types and their functions
• U4. The main financial advice areas
• U5. The process of giving financial advice, including the importance of regular reviews of the consumer's circumstances
• U6. The basic legal concepts relevant to financial advice
• U7. The UK taxation and social security systems and how they affect personal financial circumstances
• U8. The impact of inflation, interest rate volatility and other relevant socio-economic factors on personal financial plans
• U9. The FSA's approach to regulating firms and individuals
• U10. How the FSA's rules affect the control structures of firms and their relationship with the FSA
• U11. How the FSA's Conduct of Business rules apply to the process of advising customers / clients
• U12. How the anti-money laundering rules apply to dealings with private and intermediate customers
• U13. The main features of the rules for dealing with complaints and compensation
• U14. How the Data Protection Act 1998 affects the provision of financial advice and the conduct of firms generally
• K1 . The main aims and activities of the Financial Services Authority (FSA) and its approach to ethical conduct by firms and individuals
• K2 . How non-tax law and regulations impact upon firms and the process of advising clients

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Project Management - Optional Subject - Credit Value: 0.5

Aims

General Aim

To provide the student with the range of skills, techniques and practices necessary to manage projects professionally in the financial services environment.

Specific Aims

1. To give the student an overview of the role and influences of project management within the organisation.
2. To develop an ability to apply knowledge and understanding of structured processes and project management by critical analysis, evaluation and synthesis of complex issues.
3. To create a range of skills, techniques and practices in financial services project management at a professional level.

Content

1. Introduction to Project Management

Historical perspectives on project management
Triple constraint - time, cost & scope
The Project Model
Project life cycle and structures
Project influences
Stakeholders
Organisational influences - internal and external
Organisational strategy and project management
The project manager - roles and responsibilities

2. Project Initiation

The role of senior management
Project origination
Assessing project needs
Project definition
Project objectives
Functional and technical requirements
Project selection tools - benefit/cost ratio, NPV, payback period
Project Charter & Project Requirements Document

3. Project Planning

The project team
Scope planning
The Work Breakdown Structure
Estimating
Scheduling - network diagrams, Gantt charts, project calendars, milestone charts.
The critical chain
Cost planning
Resource planning
HR planning
Risk planning and management
Reserve planning
Procurement planning
Communication planning
Quality planning
The Project Plan

4. Project Implementation

Baselines
The role and structure of the project team
Assessing performance
Earned value
Variances Control - quality, cost and time
Performance reporting
Teambuilding and leadership
Dealing with conflict
Managing expectations
Managing change
Managing risk
The supply chain
Decision making techniques

5. Project Closure

Closeout
Scope verification and client acceptance
Administration and contract closure
Handover
Learning from the project

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