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In 2006, activities in the area of operational risk management continued to concentrate on the AMA implementation within the Group-wide “Basel II” project of Bank Austria Creditanstalt as well as the alignment of the operational risk framework with UniCredit Group standards. For the sub-projects “loss data collection”, “risk self-assessments”, “early warning indicators”, and “modelling”, Bank Austria Creditanstalt aims to implement the advanced measurement approach (AMA), at any rate for Bank Austria Creditanstalt AG and selected subsidiaries.
Operational risk is defined as the risk of unexpected losses due to human error, flawed management processes, natural and other catastrophes, technological failures and external events. For example, in the future, IT system failures, damage to property, processing errors or fraud will be subject to more accurate and consolidated risk measurement and management, on which the calculation of risk capital will be based.
Efforts focused on further expanding and improving the Intranet framework developed within Bank Austria Creditanstalt and used across the Group. Apart from the modules for loss data collection, reporting and risk self-assessment, which are already used in the Group, work in 2006 concentrated on risk indicators and the recording of insurance policies. The basic idea is to develop the framework into a central communication platform used for obtaining division-specific loss data and risk self-assessments as well as providing consistent information to the various divisions and the Managing Board. This will meet the requirement of involving all decision-makers and divisions in the risk management process in an efficient way.
Loss data are collected, and processes are optimised, in close coordination and cooperation with other departments and units including Internal Audit, the Compliance Office, Legal Affairs, the insurance sector as well as payments processing and settlement units. Also to be considered is the fact that Bank Austria Creditanstalt has always taken numerous measures in the various divisions to manage and reduce operational risk. Examples are data security measures, measures to ensure the confidentiality and integrity of stored data, access authorisation systems, the two-signatures principle, and a large number of monitoring and control processes as well as staff training programmes.
In addition to quantitative approaches, and in view of currently still existing quantification and modelling problems, qualitative instruments are of major importance in operational risk management. This fact has been taken into account through Bank Austria Creditanstalt’s participation in the KRI Framework Study of the Risk Management Association (RMA), which deals with the identification of risk points of operational risk and the determination of risk indicators for risk points identified as critical. In this connection the risk self-assessments introduced across the Bank Austria Creditanstalt Group were extended to include RMA-specific risk mapping for Bank Austria Creditanstalt AG and major CEE subsidiaries.
In the same way as for other types of risk, in addition to central risk controlling, Bank Austria Creditanstalt – like UCI – has built up a decentralised risk management network of contacts within divisions and at subsidiaries (OpRisk Managers). While the main task of central risk management is to define the methods used and to perform risk measurement and analysis, risk managers working on a decentralised basis are responsible for taking measures to reduce, prevent, or take out insurance against, risks.
In 2007, activities with regard to operational risk will focus on
- deepening cooperation with the ORX loss data consortium and with the RMA with a view to developing and implementing best practice and benchmarking in the area of operational risk,
- the start of supervisory reviews for Basel II implementation together with UniCredit,
- developing a new group-wide operational risk framework together with HVB and UniCredit,
- a reassessment of scenario analyses for divisions and subsidiaries,
- analysing Bank Austria Creditanstalt’s risk mitigation measures in respect of operational risk,
- further analysis of the existing insurance coverage of our Group and establishment of a corporate strategic insurance programme.