Non-financial risk management in the financial industry: a target operating model for compliance and ESG Risks
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2022
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| Beschreibung: | XXVI, 348 Seiten Illustrationen, Diagramme 24 cm x 17 cm |
| ISBN: | 9783956471889 3956471881 |
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| 020 | |a 9783956471889 |c : circa EUR 79.90 (DE), circa EUR 82.20 (AT) |9 978-3-95647-188-9 | ||
| 020 | |a 3956471881 |9 3-95647-188-1 | ||
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| 245 | 1 | 0 | |a Non-financial risk management in the financial industry |b a target operating model for compliance and ESG Risks |c N. Gittfried, G. Lienke, F. Seiferlein, J. Leiendecker, B. Gehra (eds.) |
| 250 | |a 1. Auflage | ||
| 264 | 1 | |a Frankfurt a.M. |b Frankfurt School Verlag |c 2022 | |
| 300 | |a XXVI, 348 Seiten |b Illustrationen, Diagramme |c 24 cm x 17 cm | ||
| 336 | |b txt |2 rdacontent | ||
| 337 | |b n |2 rdamedia | ||
| 338 | |b nc |2 rdacarrier | ||
| 650 | 0 | 7 | |a Risikomanagement |0 (DE-588)4121590-4 |2 gnd |9 rswk-swf |
| 650 | 0 | 7 | |a Nachhaltigkeit |0 (DE-588)4326464-5 |2 gnd |9 rswk-swf |
| 650 | 0 | 7 | |a Corporate Governance |0 (DE-588)4419850-4 |2 gnd |9 rswk-swf |
| 650 | 0 | 7 | |a Umweltbezogenes Management |0 (DE-588)4201709-9 |2 gnd |9 rswk-swf |
| 650 | 0 | 7 | |a Corporate Social Responsibility |0 (DE-588)7697760-2 |2 gnd |9 rswk-swf |
| 650 | 0 | 7 | |a Finanzdienstleistungsinstitut |0 (DE-588)4535644-0 |2 gnd |9 rswk-swf |
| 650 | 0 | 7 | |a Compliance-System |0 (DE-588)4442497-8 |2 gnd |9 rswk-swf |
| 653 | |a Risikomanagement | ||
| 653 | |a Finanzbranche | ||
| 653 | |a Nachhaltigkeit | ||
| 653 | |a Finanzdienstleistung | ||
| 653 | |a Finanzindustrie | ||
| 653 | |a Bank | ||
| 655 | 7 | |0 (DE-588)4143413-4 |a Aufsatzsammlung |2 gnd-content | |
| 689 | 0 | 0 | |a Finanzdienstleistungsinstitut |0 (DE-588)4535644-0 |D s |
| 689 | 0 | 1 | |a Umweltbezogenes Management |0 (DE-588)4201709-9 |D s |
| 689 | 0 | 2 | |a Corporate Social Responsibility |0 (DE-588)7697760-2 |D s |
| 689 | 0 | 3 | |a Corporate Governance |0 (DE-588)4419850-4 |D s |
| 689 | 0 | 4 | |a Nachhaltigkeit |0 (DE-588)4326464-5 |D s |
| 689 | 0 | 5 | |a Compliance-System |0 (DE-588)4442497-8 |D s |
| 689 | 0 | 6 | |a Risikomanagement |0 (DE-588)4121590-4 |D s |
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| 700 | 1 | |a Gittfried, Norbert |0 (DE-588)1218706295 |4 edt | |
| 700 | 1 | |a Lienke, Georg |0 (DE-588)1188243942 |4 edt | |
| 700 | 1 | |a Seiferlein, Florian |0 (DE-588)1262418763 |4 edt | |
| 700 | 1 | |a Leiendecker, Jannik |0 (DE-588)1262419077 |4 edt | |
| 700 | 1 | |a Gehra, Bernhard |0 (DE-588)130583162 |4 edt | |
| 710 | 2 | |a Frankfurt School Verlag GmbH |0 (DE-588)106429586X |4 pbl | |
| 776 | 0 | 8 | |i Erscheint auch als |n Online-Ausgabe, PDF |z 978-3-95647-190-2 |
| 776 | 0 | 8 | |i Erscheint auch als |n Online-Ausgabe, EPUB |z 978-3-95647-189-6 |
| 776 | 0 | 8 | |i Erscheint auch als |n Online-Ausgabe, MOBI |z 978-3-95647-191-9 |
| 856 | 4 | 2 | |m DNB Datenaustausch |q application/pdf |u http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=032891163&sequence=000001&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA |3 Inhaltsverzeichnis |
| 999 | |a oai:aleph.bib-bvb.de:BVB01-032891163 | ||
Datensatz im Suchindex
| _version_ | 1804182814271209472 |
|---|---|
| adam_text | TABLE
OF
CONTENTS
TABLE
OF
CONTENTS
......................................................................................................
V
EDITORS
......................................................................................................................
XXI
CONTRIBUTORS
...........................................................................................................
XXII
FOREWORD
.................................................................................................................
XXV
1
INTRODUCTION:
RISING
TO
THE
CHALLENGES
OF
NON-FINANCIAL
RISK
MANAGEMENT,
COMPLIANCE
AND
ESG
...................................................
1
PROF.
DR.
DOUGLAS
ARNER,
DR.
BERNHARD
GEHRA,
JANNIK
LEIENDECKER,
DR.
GEORG
LIENKE
1.1
NEW
RISKS
AND
CHALLENGES
........................................................................
1
1.2
A
FORWARD-LOOKING
SOLUTION
FOR
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
......................................................................
2
1.3
DEFINING
AND
ALIGNING
NON-FINANCIAL
RISK
CATEGORIES
............................
2
1.4
ESTABLISHING
A
NON-FINANCIAL
RISK
APPETITE
FRAMEWORK
TO
PREVENT
AN
UNDESIRABLE
RISK-TAKING
..................................................................
3
1.5
BUILDING
KEY
GOVERNANCE
AND
ORGANISATIONAL
PILLARS
FOR
NON-FINANCIAL
RISK
MANAGEMENT
..............................................................................
3
1.6
GENERATING
EXCELLENCE
IN
THE
NON-FINANCIAL
RISK
MANAGEMENT
LIFECYCLE
4
1.7
USING
DATA,
IT
AND
ARTIFICIAL
INTELLIGENCE
...............................................
5
1.8
PUTTING
CONDUCT
AND
ETHICS
AT
THE
CENTRE
OF
SUSTAINABLE
NON-FINANCIAL
RISK
MANAGEMENT
.....................................................................................
6
1.9
ENVIRONMENT,
SOCIAL
AND
GOVERNANCE:
IMPLICATIONS
FOR
EFFECTIVE
RISK
MANAGEMENT
............................................................................................
7
2
DEFINITION
OF
NON-FINANCIAL
RISK
IN
FINANCIAL
INSTITUTIONS
.....................
9
MARTINA
MIETZNER,
DR.
JULIA
GEBHARDT,
DR.
KATHARINA
HEFTER,
JENNIFER
RABENER,
DR.
CARSTEN
WIEGAND
2.1
INTRODUCTION
............................................................................................
9
2.2
HISTORY
OF
NON-FINANCIAL
RISK
AND
SPECIFICATIONS
BY
KEY
REGULATORS
...
11
2.2.1
A
SHORT
HISTORY
OF
NON-FINANCIAL
RISK
........................................
12
2.2.2
EXISTING
NON-FINANCIAL
RISK
SPECIFICATIONS
BY
KEY
GLOBAL
AND
REGIONAL
REGULATORS
AND
ASSOCIATIONS
..........................................
15
2.3
DIFFERENTIATION
OF
FINANCIAL
AND
NON-FINANCIAL
RISK
..............................
16
2.3.1
FINANCIAL
RISK
DEFINITION
............................................................
17
2.3.2
NON-FINANCIAL
RISK
DEFINITION
....................................................
18
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
2.4
SPECIFIC
CLUSTERS
OF
NON-FINANCIAL
RISK
....................................................
18
2.4.1
OPERATIONAL
RISK
..........................................................................
21
2.4.1.1
FINANCIAL
CRIME
RISK
......................................................
21
2.4.1.1.1
MONEY-LAUNDERING/TERRORIST
FINANCING
RISK
22
2.4.1.1.2
SANCTIONS
AND
EMBARGOES
RISK
...................
22
2.4.1.1.3
BRIBERY
AND
CORRUPTION
RISK
.......................
23
2.4.1.1.4
FACILITATION
OF
TAX
EVASION
...........................
23
2.4.1.2
CONDUCT
RISK
................................................................
24
2.4.1.2.1
MARKET
CONDUCT
RISK
..................................
24
2.4.1.2.2
CLIENT
CONDUCT
RISK
....................................
25
2.4.1.2.3
EMPLOYEE
CONDUCT
RISK
...............................
25
2.4.1.3
REGULATORY
COMPLIANCE
RISK
........................................
25
2.4.1.4
FRAUD
RISK
......................................................................
26
2.4.1.4.1
ACCOUNT-OPENING
FRAUD
RISK
.......................
27
2.4.1.4.2
DEBT/CREDIT
CARD
FRAUD
RISK
.........................
27
2.4.1.4.3
FRAUDULENT
PAPER-BASED
PAYMENT
TRANS
ACTIONS
RISK
..................................................
28
2.4.1.4.4
ONLINE
BANKING
FRAUD
RISK
.........................
28
2.4.1.4.5
CREDIT
FRAUD
RISK
.........................................
28
2.4.1.4.6
THEFT
RISK
.....................................................
28
2.4.1.4.7
EMBEZZLEMENT/BREACH
OF
TRUST
RISK
...........
28
2.4.1.4.8
ANTITRUST
VIOLATION
RISK
...............................
29
2.4.1.4.9
BALANCE
SHEET
MANIPULATION
.......................
29
2.4.1.5
INFORMATION,
COMMUNICATION
&
TECHNOLOGY
(ICT)
AND
CYBER
RISK
..............................................................
29
2.4.1.5.1
DATA
CONFIDENTIALITY
RISK
.............................
31
2.4.1.5.2
DATA
AVAILABILITY
RISK
...................................
32
2.4.1.5.3
DATA
INTEGRITY
RISK
.......................................
32
2.4.1.5.4
INFORMATION
SECURITY
RISK
...........................
32
2.4.1.6
DATA
PRIVACY
AND
BANK
SECRECY
RISK
............................
33
2.4.1.6.1
DATA
PRIVACY
RISK
.........................................
33
2.4.1.6.2
BANK
SECRECY
RISK
.........................................
34
2.4.1.7
RESILIENCE
RISK
..............................................................
34
2.4.1.8
OUTSOURCING
AND
VENDOR
RISK
......................................
35
2.4.1.8.1
INTRAGROUP
OUTSOURCING
RISK
.......................
36
2.4.1.8.2
EXTERNAL
OUTSOURCING
RISK
...........................
36
2.4.1.8.3
VENDOR
RISK
.................................................
37
2.4.1.9
TAX
REPORTING
RISK
........................................................
37
2.4.1.10
OTHER
OPERATIONAL
RISK
................................................
37
2.4.1.10.1
HUMAN
RESOURCES
RISK
...............................
37
2.4.1.10.2
LEGAL
RISK
...................................................
37
2.4.1.10.3
PHYSICAL
DAMAGE
RISK
.................................
38
2.4.1.10.4
EXECUTION,
DELIVERY
AND
PROCESS
RISK
.......
38
2.4.1.10.5
REPORTING
RISK
...........................................
38
2.4.1.10.6
ACCOUNTING
RISK
.........................................
39
TABLE
OF
CONTENTS
2.4.1.10.7
PROJECT
RISK
...............................................
39
2.4.1.10.8
COMPETITION
LAW
RISK
...............................
39
2.4.1.10.9
MODEL
RISK
.................................................
39
2.4.2
STRATEGIC
RISK
................................................................................
40
2.4.2.1
REPUTATIONAL
RISK
.........................................................
40
2.4.2.2
SUSTAINABILITY
RISK
.......................................................
41
2.4.2.2.1
CLIMATE
CHANGE
RISK
.................................
41
2.4.2.2.2
HUMAN
RIGHTS
RISK
.....................................
42
2.4.2.3
BUSINESS
RISK
...............................................................
42
2.4.2.3.1
FORECASTING
RISK
.......................................
42
2.4.2.3.2
INORGANIC
GROWTH
RISK
................................
43
2.4.2.3.3
NEW
BUSINESS
RISK
.....................................
43
2.4.2.3.4
INVESTOR
RELATIONS
RISK
.............................
43
2.5
CONCLUSION
AND
OUTLOOK
........................................................................
43
3
RISK
BOUNDARIES
-
SETTING
AN
ANALYTICAL
RISK
APPETITE
FRAMEWORK
FOR
NON-FINANCIAL
RISKS
...............................................................................
45
FEDERICO
TRUFFELLI,
DR.
ULRICH
GORES,
LORENZO
FANTINI,
MICHELE
RIGONI,
LUCA
RANCAN
3.1
INTRODUCTION
...........................................................................................
45
3.1.1
REGULATORY
REQUIREMENTS
......................................................
45
3.1.2
RAF
IN
PRACTICE
......................................................
47
3.2
RAF
LEVEL
1:
OVERALL
RISK
APPETITE
STATEMENT
..................................
49
3.2.1
OVERALL
STATEMENT
.........................................................................
49
3.2.2
PROHIBITED
ACTIVITIES
.....................................................................
51
3.3
RAF
LEVEL
2:
RISK
APPETITE
METRICS
......................................................
51
3.3.1
DEFINING
APPROPRIATE
METRICS
.....................................................
51
3.3.2
METRICS:
SETTING
THE
THRESHOLDS
...................................................
52
3.3.2.1
THRESHOLDS
BASED
ON
BENCHMARK
AND
HISTORICAL
INTERNAL
LOSS
DATA
FOR
A
METRIC
BASED
ON
OPERATIONAL
LOSSES
.............................................................
53
3.3.2.2
THRESHOLDS
BASED
ON
RESIDUAL
RISK
LEVELS
FOR
A
METRIC
BASED
ON
RISK
ASSESSMENT
.............................................
54
3.4
RAF
LEVEL
3:
KEY
RISK
INDICATORS
........................................................
55
3.4.1
SELECTING
KEY
RISK
INDICATORS
......................................................
55
3.4.1.1
CANDIDATE
INDICATORS
IDENTIFICATION
............................
56
3.4.1.2
APPETITE
TRACKING
SUITABILITY
......................................
56
3.4.1.3
EXPERT
JUDGEMENT
........................................................
56
3.4.2
KRIS:
SETTING
AND
CALIBRATING
THE
THRESHOLDS
............................
60
3.4.2.1
THRESHOLD
CALIBRATION
BASED
ON
HISTORICAL
DATA
ANALYSIS
AND
PERCENTILES
..............................................
60
3.4.2.2
THRESHOLD
FINE-TUNING
BASED
ON
BENCHMARKING
AND
BACKTESTING
.....................................................
62
VII
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
3.5
RAF
GOVERNANCE
....................................................................................
63
3.5.1
RAF
DESIGN
AND
UPDATE
...............................................................
64
3.5.2
RAF
MONITORING
AND
REPORTING
...................................................
65
3.5.3
RAF
THRESHOLD
BREACHES
AND
ESCALATION
.....................................
66
3.5.4
ACTION
PLAN
DEFINITION
................................................................
68
4
THE
THREE
LINES
OF
DEFENCE
MODEL:
KEY
SUCCESS
FACTORS
FOR
EFFECTIVE
RISK
MANAGEMENT
...................................................................................
71
DR.
OLIVER
ENGELS,
MARC
PETER
KLEIN,
PETER
GIIRTLSCHMIDT,
DR.
GEORG
LIENKE,
REI
TANAKA
4.1
INTRODUCTION
............................................................................................
71
4.2
REGULATORY
FRAMEWORK
IN
SELECTED
KEY
JURISDICTIONS
............................
72
4.2.1
EUROPEANUNION
...........................................................................
72
4.2.2
UNITED
STATES
OF
AMERICA
.............................................................
73
4.2.3
HONG
KONG
...................................................................................
73
4.2.4
SINGAPORE
.......................................................................................
73
4.2.5
RISK-TYPE-SPECIFIC
QUALIFICATIONS
OF
THE
3LOD
MODEL:
FINANCIAL
CRIME
PREVENTION
..............................................................
74
4.2.5.1
EU:
REMAINING
COUNTRY-SPECIFIC
VARIATION
IN
1
ST
AND
2ND
LOD
MANDATE
..........................................................
74
4.2.5.2
UNITED
STATES
OF
AMERICA:
BSA
COMPLIANCE
OFFICER
..
74
4.2.5.3
HONG
KONG:
MONEY
LAUNDERING
REPORTING
OFFICER
AND
COMPLIANCE
OFFICER
..............................................
75
4.3
KEY
ROLES
AND
RESPONSIBILITIES
OF
1
ST
,
2ND
AND
3
RD
LOD
............................
75
4.3.1
THE
FIRST
LINE
OF
DEFENCE:
RISK
OWNER
...........................................
76
4.3.1.1
SCOPE
OF
1
ST
LOD
MANDATE
............................................
76
4.3.1.1.1
RISK
OWNERSHIP
..........................................
76
4.3.1.1.2
IMPLEMENTATION
AND
EXECUTION
OF
1ST
LOD
CONTROLS
......................................................
76
4.3.1.2
ALLOCATION
OF
1
ST
LOD
RESPONSIBILITY
..........................
76
4.3.1.3
1
ST
LOD
RISK-COORDINATING
FUNCTION
(1.5
TH
LOD)
........
77
4.3.1.3.1
COORDINATION
OF
RISK
MANAGEMENT
ACTIVI
TIES
................................................................
77
4.3.1.3.2
INTERFACE
TO
2ND
LOD
..................................
77
4.3.1.3.3
REGULATORY
ADVISOR
....................................
77
4.3.2
THE
SECOND
LINE
OF
DEFENCE:
INTERNAL
CONTROL
FUNCTIONS
............
78
4.3.2.1
SCOPE
OF
2ND
LOD
MANDATE
..........................................
78
4.3.2.1.1
STANDARD
SETTING
...........................................
78
4.3.2.1.2
TESTING
OF
1
ST
LOD
CONTROLS
......................
79
4.3.2.1.3
RISK
ASSESSMENT
...........................................
79
4.3.2.1.4
TRAINING
AND
ADVISORY
.................................
79
4.3.2.2
RISK
MATERIALITY
AND
CORRESPONDING
INTENSITY
OF
2ND
LOD
RISK
OVERSIGHT
........................................................
79
VIII
TABLE
OF
CONTENTS
4.3.2.3
INDEPENDENCE
OF
2
ND
LOD
RISK
OVERSIGHT
....................
80
4.3.2.3.1
ORGANISATIONAL
INDEPENDENCE
...................
80
4.3.2.3.2
FUNCTIONAL
INDEPENDENCE
...........................
80
4.3.2.3.3
INTERNAL
CONTROL
FUNCTIONS
PERFORMING
1ST
LOD
ACTIVITIES
............................................
81
4.3.2.4
KEY
SUCCESS
FACTORS
FOR
EFFECTIVE
2ND
LOD
RISK
OVERSIGHT
.......................................................
82
4.3.2.4.1
METHODOLOGY
CONSISTENCY
ACROSS
2
ND
LOD
FUNCTIONS
..........................................
82
4.3.2.4.2
BODIES
AND
COMMITTEES:
ADEQUATE
2
ND
LOD
PARTICIPATION
AND
INFORMATION
SHARING
........................................................
83
4.3.2.4.3
APPOINTMENT
OF
PRIMUS
INTER
PARES
NON
FINANCIAL
RISK
GOVERNANCE
FUNCTION
.
84
4.3.3
THE
THIRD
LINE
OF
DEFENCE:
INTERNAL
AUDIT
AS
PROVIDER
OF
INDEPENDENT
ASSURANCE
................................................................
85
4.3.3.1
INDEPENDENT
ASSURANCE
................................................
85
4.3.3.1.1
ADEQUACY
OF
RISK
MANAGEMENT
FRAMEWORK
85
4.3.3.1.2
DESIGN
AND
OPERATING
EFFECTIVENESS
..........
85
4.3.3.1.3
COMPLIANCE
WITH
REGULATORY
REQUIREMENTS
AND
INTERNAL
STANDARDS
...............................
86
4.3.3.2
ADVISING
THE
BOARD
OF
DIRECTORS
..................................
86
4.4
COMMON
PITFALLS
OF
THE
3LOD
MODEL
AND
PRECAUTIONARY
MEASURES
.
.
86
4.4.1
INSUFFICIENT
RISK
OWNERSHIP
BY
1
ST
LOD
.....................................
86
4.4.2
LACK
OF
2ND
LOD
EXPERTISE
...........................................................
87
4.4.3
INADEQUATE
ASSURANCE
BY
3
RD
LOD
...............................................
87
4.5
CONCLUSION
..............................................................................................
88
5
GLOBAL
FUNCTIONAL
LEAD
IN
NON-FINANCIAL
RISK
MANAGEMENT:
ENSURING
CONSISTENCY
AND
INTEGRATION
IN
COMPLEX
ORGANISATIONS
....
89
ULRIKE
BROUZI,
DR.
MICHAEL
LANGE,
P.
ROBERT
MIESZKOWSKI,
JANNIK
LEIENDECKER,
DR.
GEORG
LIENKE,
FLORIAN
SEIFERLEIN,
NORBERT
GITTFRIED,
REI
TANAKA
5.1
INTRODUCTION
............................................................................................
89
5.2
REGULATORY
FRAMEWORK
IN
SELECT
KEY
MARKETS
......................................
91
5.2.1
EUROPEANUNION
........................................................................
91
5.2.2
UNITED
STATES
OF
AMERICA
..........................................................
91
5.2.3
HONG
KONG
..................................................................................
92
5.2.4
SINGAPORE
....................................................................................
92
5.3
GLOBAL
FUNCTIONAL
LEAD:
INDIVIDUAL
CORPORATE
PARAMETERS
TO
CONSIDER
.
92
5.3.1
CORPORATE
CULTURE
......................................................................
92
5.3.2
ORGANISATION
S
COMPLEXITY
.........................................................
93
5.3.3
IT
LANDSCAPE
................................................................................
93
5.3.4
GEOGRAPHICAL
FOOTPRINT
..............................................................
93
IX
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
5.4
MAJOR
COMPONENTS
OF
GLOBAL
FUNCTIONAL
LEAD
IN
NON-FINANCIAL
RISK
MANAGEMENT
......................................................................................
93
5.4.1
OPERATING
MODEL:
STRIKING
A
BALANCE
BETWEEN
GLOBAL
STANDARDS
AND
REGIONAL
EXECUTION
................................................................
94
5.4.1.1
REGULATORY
HORIZON
SCREENING
....................................
95
5.4.1.2
SETTING
OF
RISK-SPECIFIC
STANDARDS
................................
96
5.4.1.3
TRAINING
AND
ADVISORY
..................................................
97
5.4.1.4
CONTROLS
BY
THE
1
ST
AND
2ND
LINE
OF
DEFENCE
..................
97
5.4.1.5
NON-FINANCIAL
RISK
ASSESSMENT
....................................
98
5.4.1.6
NON-FINANCIAL
RISK
REPORTING
........................................
99
5.4.1.7
GROUP
RISK
OVERSIGHT
....................................................
99
5.4.2
REPORTING
LINES:
ESTABLISHING
IMPLEMENTATION
ACCOUNTABILITY
IN
VERTICAL
FUNCTIONS
.............................................................................
100
5.4.2.1
SOLID
REPORTING
LINES
INTO
LOCAL
LEGAL
ENTITY
AND
BRANCH
100
5.4.2.2
DOTTED
REPORTING
LINES
INTO
GLOBAL
RISK
MANAGEMENT
ORGANISATION
..................................................................
101
5.4.3
MEETING
GOVERNANCE:
SUPPORTING
EFFECTIVE
MANAGEMENT
OF
A
GLOBAL
RISK
FUNCTION
.........................................................
101
5.5
CONCLUSION
................................................................................................
102
6
POLICIES
AND
PROCEDURES:
FRAMEWORK
AND
GOVERNANCE
REQUIREMENTS
IN
THE
FINANCIAL
SECTOR
.................................................................................
105
DR.
ERASMUS
FABER,
BJORN
STAUBER,
DR.
GEORG
LIENKE
6.1
INTRODUCTION
.............................................................................................
105
6.2
REGULATORY
FRAMEWORK
IN
SELECTED
KEY
JURISDICTIONS
.............................
105
6.2.1
EUROPEAN
BANKING
AUTHORITY
(EBA)
........................................
106
6.2.2
US
REGULATORS
..............................................................................
106
6.2.2.1
THE
FEDERAL
RESERVE
....................................................
106
6.2.2.2
OFFICE
OF
THE
COMPTROLLER
OF
THE
CURRENCY
..............
107
6.2.3
HONG
KONG
MONETARY
AUTHORITY
..............................................
107
6.2.4
MONETARY
AUTHORITY
OF
SINGAPORE
............................................
108
6.3
POLICY
FRAMEWORK:
KEY
IMPLICATIONS
FOR
A
TARGET
CONCEPT
....................
109
6.3.1
STATUS
QUO:
NEED
FOR
STRUCTURED
APPROACH
..................................
109
6.3.1.1
LACK
OF
A
HARMONISED
APPROACH
..................................
109
6.3.1.2
POLICY
GAPS
AND
REDUNDANCIES
......................................
109
6.3.2
POLICY
FRAMEWORK:
DESIGN
CONCEPT
AND
HIERARCHIES
..................
110
6.3.2.1
DESIGN
CONCEPT:
KEY
HYPOTHESES
FOR
AN
EFFECTIVE
POLICY
FRAMEWORK
........................................................
110
6.3.2.1.1
HARMONISED
DESIGN
APPROACH
..................
110
6.3.2.1.2
COMPLETENESS
.............................................
110
6.3.2.1.3
UNIFORM
NAMING
CONVENTION
....................
110
6.3.2.1.4
PRECISE
WORDING
...........................................
ILL
6.3.2.1.5
ASSIGNMENT
OF
RESPONSIBILITIES
...................
ILL
6.3.2.1.6
GOVERNANCE
RULES
.........................................
ILL
6.3.2.1.7
LINKAGE
TO
INTERNAL
PROCESSES
AND
CONTROLS
111
X
TABLE
OF
CONTENTS
6
.2.2.2
SUGGESTED
HIERARCHY
LEVELS:
KEY
CRITERIA
AND
EXAMPLES
111
6.3.2.3
LEVEL
ONE:
OVERARCHING
RISK
STRATEGIES,
POLICIES
AND
DOCUMENTS
-
RISK
AND
BUSINESS
SEGMENT
AGNOSTIC
....
112
6.2.2.3.1
KEY
CRITERIA
.................................................
112
6.3.2.3.2
KEY
RISK
TYPE
AND
BUSINESS
SEGMENT
AGNOSTIC
TOPICS
..........................................
112
6.3.2.4
LEVEL
TWO:
RISK-TYPE-SPECIFIC
POLICIES
AND
PROCEDURES
113
6.3.2.4.1
KEY
CRITERIA
.................................................
113
6.3.2.4.2
RISK-TYPE-SPECIFIC
DOCUMENTS
...................
113
6.3.2.5
LEVEL
THREE:
CUSTOMER-RELATED
AND
BUSINESS-SPECIFIC
POLICIES
AND
PROCEDURES
...............................
114
6.3.2.5.1
KEY
CRITERIA
................................................
114
6.3.2.5.2
CUSTOMER-RELATED
AND
BUSINESS-SPECIFIC
TOPICS
..........................................................
115
6.3.2.6
LEVEL
FOUR:
POLICIES
AND
PROCEDURES
IN
INTERNATIONAL
LOCATIONS
.........................................................
115
6.3.2.6.1
SCOPE
OF
APPLICABILITY:
SUBSIDIARY
COMPANIES
AND
BRANCH
OFFICES
.
115
6.3.2.6.2
KEY
CRITERIA
................................................
115
6.4
POLICY
GOVERNANCE,
REPOSITORY
AND
WORKFLOW
TOOL
..............................
116
6.4.1
APPROVAL
OF
POLICIES
AND
PROCEDURES
........................................
117
6.4.1.1
LEVEL
ONE:
BOARD
OF
DIRECTORS
.......................................
117
6.4.1.2
LEVEL
TWO:
RESPONSIBLE
BOARD
MEMBER
.......................
117
6.4.1.3
LEVEL
THREE:
SENIOR
MANAGEMENT
ON
N-1
LEVEL
............
117
6.4.1.4
LEVEL
FOUR:
GENERAL
MANAGER
OR
2ND
LOD
N-1
.............
117
6.4.2
AUTHORSHIP,
OWNERSHIP,
CREATION
AS
WELL
AS
UPDATE
OF
POLICIES
AND
PROCEDURES
...............................................................
118
6.4.2.1
DOCUMENT
AUTHORSHIP
...................................................
118
6.4.2.2
DOCUMENT
OWNERSHIP
...................................................
118
6.4.2.3
DOCUMENT
CREATION
PROCESS
.........................................
118
6.4.2.4
STRINGENT
MANAGEMENT
OF
UPDATE
PROCESS
....................
118
6.4.2.4.1
REGULAR
VALIDATION
BASED
ON
TIME
INTERVALS
119
6.4.2.4.2
AD
HOC
UPDATES
..........................................
119
6.4.3
POLICY
REPOSITORY,
INCLUDING
WORKFLOW
TOOL:
CENTRALISED
MANAGEMENT
OF
POLICIES
AND
PROCEDURES
.....................
119
6.4.3.1
FACILITATION
OF
ACCESS
....................................................
120
6.4.3.2
DOCUMENT
LIFECYCLE
MANAGEMENT
..............................
120
6.4.3.2.1
REGULAR
VALIDATION
OF
DOCUMENTS
............
120
6.4.3.2.2
AD
HOC
UPDATES
..........................................
120
6.4.3.2.2.1
CHANGES
IN
BUSINESS
AND
OPER
ATING
MODEL
.........
120
6.4.3.2.2.2
CHANGES
IN
REGULATORY
FRAME
WORK
........................................
121
6.4.3.3
AUDIT-PROOF
CHANGE
LOG
..............................................
121
6.5
CONCLUSION
.............................................................................................
121
XI
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
7
TOP-DOWN
RISK
AND
CONTROL
ASSESSMENT:
A
FORWARD-LOOKING
APPROACH
TO
EVALUATE
COMPANY-WIDE
NON-FINANCIAL
RISK
EXPOSURE
.
123
HURDOGAN
IRMAK,
BURCU
NASUHOGLU,
DR.
ERASMUS
FABER,
LORENZO
FANTINI,
BENEDETTA
TESTINO,
JANNIK
LEIENDECKER,
BARBARA
FOJCIK,
DR.
GEORG
LIENKE
7.1
INTRODUCTION
123
7.2
TOP-DOWN
VS.
BOTTOM-UP:
DIFFERENT
APPROACHES
BASED
ON
DESIRED
OUTCOMES
..........................................................................................
124
7.2.1
APPROACHES:
RISK-SPECIFIC
FOCUS
VS.
OVERARCHING
NON-FINANCIAL
RISK
COVERAGE
................................................................................
124
7.2.1.1
BOTTOM-UP
APPROACH:
RISK-SPECIFIC,
GRANULAR
FOCUS
..
125
7.2.1.2
TOP-DOWN
APPROACH:
OVERARCHING,
HOLISTIC
NON
FINANCIAL
RISK
COVERAGE
.....................................
125
7.2.2
POTENTIAL
OUTCOMES:
DIFFERENT
SCOPE
OF
RISK-COVERAGE
AND
LEVEL
OF
GRANULARITY
.................................................................
126
7.3
KEY
SUCCESS
FACTORS:
MAXIMISING
THE
EFFECTIVENESS
OF
TOP-DOWN
RISK
AND
CONTROL
ASSESSMENTS
..................................................................
126
7.4
REGULATORY
FRAMEWORK,
BEST
PRACTICE
AND
STANDARD
SETTER
GUIDELINES
.
.
127
7.4.1
COSO
ERM
FRAMEWORK
.............................................................
127
7.4.2
BANK
FOR
INTERNATIONAL
SETTLEMENTS
.............................................
128
7.4.3
EBA
AND
ECB
...............................................................................
128
7.5
METHODOLOGY
OF
TOP-DOWN
RISK
AND
CONTROL
ASSESSMENT:
EVALUATION
OF
INHERENT
RISK,
CONTROL
ADEQUACY
AND
RESIDUAL
RISK
........................
129
7.5.1
NON-FINANCIAL
RISK
TAXONOMY
AS
A
STARTING
POINT
......................
129
7.5.2
MEASUREMENT
OF
INHERENT
RISK
....................................................
129
7.5.2.1
CALCULATION
OF
SEVERITY
................................................
130
7.5.2.1.1
ORGANISATION-SPECIFIC
RISK
INDICATORS
....
130
7.5.2.1.2
INDUSTRY
ADJUSTMENTS
................................
132
7.5.2.1.3
WEIGHTING
OF
RISK
INDICATORS
BASED
ON
DATA
SOURCE
RELIABILITY
........................................
133
7.5.2.2
CALCULATION
OF
LIKELIHOOD
............................................
133
7.5.2.3
INHERENT
RISK
MATRIX
......................................................
134
7.5.3
MEASUREMENT
OF
INTERNAL
CONTROL
ADEQUACY
..............................
134
7.5.3.1
CONTROL
INDICATORS
........................................................
135
7.5.3.2
WEIGHTING
OF
CONTROL
INDICATORS
..................................
136
7.5.3.3
CONTROL
RATING
..............................................................
136
7.5.4
DETERMINATION
OF
RESIDUAL
RISK
...................................................
137
7.6
BREAKOUT:
BUILDING
AN
INSTITUTION-WIDE
INTERNAL
CONTROL
SYSTEM
..........
138
7.6.1
INTRODUCTION
.................................................................................
138
7.6.2
ALTERNATIVE
PATH
TO
BUILDING
AN
INTERNAL
CONTROL
FRAMEWORK:
TOP-DOWN,
RISK-BASED
APPROACH
................................................
138
7.6.3
FIVE-STEP
APPROACH:
BUILDING
AN
INTERNAL
CONTROL
FRAMEWORK
..
139
7.6.3.1
STEP
1:
DETERMINATION
OF
NFR
CRITICALITY
....................
139
7.6.3.2
STEP
2:
MAPPING
OF
KEY
RISKS
TO
PROCESS
LANDSCAPE
..
.
139
7.6.3.3
STEP
3:
DEFINITION
OF
CONTROL
OBJECTIVES,
KEY
CONTROLS
AND
CONTROL
REPOSITORY
..................................................
140
XII
TABLE
OF
CONTENTS
7.6.3.4
STEP
4:
ASSESSMENT
OF
CONTROLS
....................................
140
7.6.3.5
STEP
5:
DESIGN
NFR
CONTROL
REPORT
............................
141
7.7
APPROACH
TO
HANDLING
RESIDUAL
RISK
......................................................
141
7.7.1
HIGH
RESIDUAL
RISK:
PROJECT
AND
INVESTMENT
IMPERATIVE
TO
MITIGATING
RESIDUAL
RISK
.................................................
142
7.7.2
MEDIUM-HIGH
RESIDUAL
RISK:
ACTION
PLAN
TO
REDUCE
INHERENT
RISK
EXPOSURE
.................................................................
142
7.7
.3
MEDIUM-LOW
RESIDUAL
RISK:
CONTINUOUS
CONTROL
TESTING
AND
SELECTED
ACTION
REQUESTED
...............................................
142
7.7.4
LOW
RESIDUAL
RISK:
PERIODIC,
RISK-BASED
CONTROLS
......................
142
7.8
INTEGRATED
PROCESS
TO
PERFORM
ANNUAL
TOP-DOWN
RISK
AND
CONTROL
ASSESSMENT
.......................................................................................
143
7.8.1
PHASE
1:
PRE-ASSESSMENT
BY
CONTROL
FUNCTIONS
..........................
143
7.8.2
PHASE
2:
ASSESSMENT
BY
BUSINESS
SENIOR
MANAGEMENT
..............
144
7.8.3
PHASE
3:
VALIDATION
AND
REPORTING
..............................................
144
8
A
TOP-DOWN
APPROACH
TO
NON-FINANCIAL
RISK
REPORTING:
COLLABORATION
ACROSS
RISK
TYPES
FOR
SUSTAINABLE
RISK
STEERING
............
145
VALERIE
VILLAFRANCA,
DR.
GEORG
LIENKE,
FLORIAN
SEIFERLEIN,
KAI
GAMMELIN,
DR.
KATHARINA
HEFTER,
NORBERT
GITTFRIED
8.1
INTRODUCTION:
THE
IMPERATIVE
OF
TOP-DOWN
NON-FINANCIAL
RISK
REPORTING
.........................................................................................
145
8.2
REGULATORY
FRAMEWORK
IN
SELECTED
KEY
MARKETS
..................................
146
8.2.1
EUROPEANUNION
.........................................................................
146
8.2.2
UNITED
STATES
...............................................................................
147
8.2.3
HONG
KONG
...................................................................................
147
8.2.4
SINGAPORE
....................................................................................
148
8.3
CURRENT
STATE
OF
NON-FINANCIAL
RISK
REPORTING:
FORMATS
WITH
INCON
SISTENT
SCOPES
AND
METHODOLOGIES
..................................................
148
8.3.1
OPERATIONAL
RISK
REPORTS
............................................................
148
8.3.2
ADDITIONAL
2ND
LOD
REPORTS
ON
SPECIFIC
NON-FINANCIAL
RISK
TYPES
...............................................................................
149
8.3.3
REPORTS
ON
INTERNAL
CONTROL
SYSTEM
..........................................
150
8.4
KEY
PARAMETERS
OF
TOP-DOWN
NON-FINANCIAL
RISK
REPORTING:
METHODOLOGY,
REQUIRED
INPUT
AND
RESULTS
......................................
150
8.4.1
IDENTIFICATION
AND
EVALUATION
OF
KEY
RISK
INDICATORS
................
151
8.4.1.1
DETERMINATION
OF
KEY
RISK
INDICATORS,
THRESHOLDS
AND
POTENTIAL
INPUT
SOURCES
................................................
151
8.4.1.1.1
STEP
1:
UNDERSTAND
RISK
FACTORS
.................
151
8.4.1.1.2
STEP
2:
IDENTIFY
KEY
RISK
INDICATORS
..........
151
8.4.1.1.3
STEP
3:
DERIVE
INSTITUTION-SPECIFIC
THRESH
OLDS
..............................................................
151
XIII
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
8.4.1.2
EXAMPLE
KRIS:
FINANCIAL
CRIME
RISK,
OUTSOURCING
RISK
AND
HUMAN
RESOURCES
RISK
............................................
152
8.4.1.2.1
KEY
RISK
INDICATORS
FOR
FINANCIAL
CRIME
RISK
..............................................................
152
8.4.1.2.2
KEY
RISK
INDICATORS
FOR
OUTSOURCING
RISK
.
.
154
8.4.1.2.3
KEY
RISK
INDICATORS
FOR
HUMAN
RESOURCES
RISK
..............................................................
154
8.4.1.3
EVALUATION
OF
KEY
RISK
INDICATORS
................................
155
8.4.2
ASSESSMENT
OF
KEY
CONTROLS
AS
RISK-MITIGATING
MEASURES
........
156
8.4.2.1
STEP
1:
CAPTURING
AND
ALLOCATION
OF
CONTROLS
..............
156
8.4.2.2
STEP
2:
ASSESSMENT
OF
CONTROLS
......................................
158
8.4.3
DETERMINATION
OF
RESIDUAL
RISK
AND
REQUIRED
RISK-MITIGATING
ACTIONS
..............................................................................
159
8.4.3.1
HIGH
LEVEL
OF
RESIDUAL
RISK
............................................
160
8.4.3.2
MEDIUM
LEVEL
OF
RESIDUAL
RISK
......................................
160
8.4.3.3
LOW
LEVEL
OF
RESIDUAL
RISK
............................................
161
8.5
REPORTING
PROCESS
AND
GOVERNANCE
........................................................
161
8.5.1
GOVERNANCE
ARRANGEMENTS
..........................................................
161
8.5.1.1
BOARD
OF
DIRECTORS
........................................................
161
8.5.1.2
CHAIRMAN
OF
THE
SUPERVISORY
BOARD
............................
161
8.5.1.3
CENTRAL
REPORTING
UNIT
..................................................
161
8.5.1.4
2ND
LOD
CONTROL
FUNCTIONS
............................................
162
8.5.1.5
OPERATIONAL
RISK
DEPARTMENT
......................................
162
8.5.2
REPORTING
PROCESS
........................................................................
162
8.6
CONCLUSION
...............................................................................................
163
9
INTERNAL
INVESTIGATIONS
INTO
CORPORATE
MISCONDUCT:
APPLYING
AN
INVESTIGATIVE
APPROACH
TO
ENABLE
PROACTIVE
RISK
OVERSIGHT
....................
165
LORA
VON
PLOETZ,
FLORIAN
SEIFERLEIN
9.1
INTRODUCTION
...........................................................................................
165
9.2
SELECTED
LAWS,
REGULATIONS
AND
STANDARDS
................................................
166
9.2.1
SUPERVISORY
SANCTION
RELIEF
BASED
ON
VOLUNTARY
INVESTIGATION
AND
COOPERATION
..............................................................
168
9.2.1.1
JURISDICTIONS
POTENTIALLY
REDUCING
SANCTIONS
AND
EN
FORCEMENT
ACTIONS
DUE
TO
EFFECTIVE
INVESTIGATION
AND
COOPERATION
.....................................................
168
9.2.1.2
JURISDICTIONS
NOT
EXPLICITLY
PROVIDING
A
BONUS
FOR
SELF
DISCLOSURE
AND
COOPERATION
...........................
170
9.2.1.3
JURISDICTIONS
WHERE
INVESTIGATIONS
AND
COOPERATION
DO
NOT
CHANGE
ASSESSMENT
OF
LAW
ENFORCEMENT
..........
170
9.2.2
STATUTORY
DISCLOSURE
REQUIREMENTS
.............................................
171
9.2.3
INVESTIGATION
STANDARDS
AND
REQUIREMENTS
.................................
172
XIV
TABLE
OF
CONTENTS
9.3
CONCEPT
FOR
PROACTIVE
RISK
OVERSIGHT
USING
AN
INVESTIGATIVE
APPROACH
173
9.3.1
INVESTIGATION
PROCESS
..................................................................
174
9.3.1.1
PROACTIVE
RISK
MANAGEMENT
........................................
175
9.3.1.2
STRATEGIC
AND
TACTICAL
INVESTIGATIONS
............................
177
9.3.1.3
EXAMPLE:
SANCTIONS-DRIVEN
INVESTIGATIONS
..................
178
9.3.2
INFORMATION
SHARING
AND
GLOBAL
RISK
MANAGEMENT
..................
181
9.3.2.1
HOW
TO
CONNECT
NEEDLES
IN
THE
SAME
HAYSTACK
(IN
A
FINANCIAL
INSTITUTION)
............................................
182
9.3.2.2
HOW
TO
CONNECT
NEEDLES
IN
DIFFERENT
HAYSTACKS
(BETWEEN
DIFFERENT
FINANCIAL
INSTITUTIONS)
...
183
9.4
SUCCESS
FACTORS
AND
COMMON
PITFALLS
......................................................
185
10
TECHNICAL
APPLICATION
AND
DATA
ARCHITECTURE
FOR
NON-FINANCIAL
RISK
MANAGEMENT
...........................................................................................
187
KAI
GAMMELIN,
BJORN
STAUBER,
DR.
CHRISTIAN
N.
SCHMID,
DR.
JAN-OLIVER
FROHLICH,
ANNIKA
MELCHERT,
DANIEL
WAGNER
10.1
INTRODUCTION
...........................................................................................
187
10.1.1
A
FRAGMENTED
IT
LANDSCAPE
........................................................
187
10.1.2
IT
S
IMPACT
ON
DATA
AVAILABILITY
................................................
190
10.1.3
DATA
AVAILABILITY
ACROSS
BORDERS
................................................
190
10.1.4
ADDITIONAL
CHALLENGES
ASSOCIATED
WITH
GROUP
COMPANIES
........
190
10.2
REGULATORY
REQUIREMENTS
........................................................................
192
10.3
SIX
CHALLENGES
IN
NFR
MANAGEMENT
AND
REPORTING
..............................
193
10.3.1
CHALLENGE
1:
THE
LACK
OF
A
DEFINED
NFR-IT
STRATEGY
................
193
10.3.2
CHALLENGE
2:
RESPONSIBILITY
FOR
AND
EXECUTION
OF
NFR
REPORT
ING-RELATED
ACTIVITIES
(OPERATIONAL
UNIT
VS.
NFR
MANAGEMENT)
194
10.3.3
CHALLENGE
3:
CONSISTENCY
AND
TRANSPARENCY
OF
IT
ARCHITECTURE
195
10.3.4
CHALLENGE
4:
ALIGNMENT
OF
DATA
ARCHITECTURE
FOR
TRANSPARENCY
ON
DATA
LINEAGE
...............................................................
196
10.3.5
CHALLENGE
5:
IMPLEMENTING
A
SOLID
IT
TARGET
ARCHITECTURE
....
197
10.3.6
CHALLENGE
6:
COST-BENEFIT
CONSIDERATIONS
..................................
197
10.4
A
TARGET
IT
ARCHITECTURE
FOR
NFR
..........................................................
197
10.4.1
THE
NFR
ARCHITECTURE
ECOSYSTEM
..............................................
200
10.4.2
DASHBOARDS
AND
REPORTING
........................................................
200
10.4.3
OTHER
KEY
ENABLING
TECHNOLOGIES
..............................................
201
11
DATA
GOVERNANCE
IN
NON-FINANCIAL
RISK
MANAGEMENT
..........................
203
BJORN
STAUBER,
DR.
CHRISTIAN
N.
SCHMID,
DR.
JAN-OLIVER
FROHLICH,
ANNIKA
MELCHERT,
DANIEL
WAGNER
11.1
INTRODUCTION
...........................................................................................
203
11.2
REGULATORY
REQUIREMENTS
........................................................................
204
11.3
DATA
GOVERNANCE
TO
SUPPORT
NFR
MANAGEMENT
..................................
204
11.3.1
DATA
STRUCTURES
..........................................................................
205
11.3.2
TARGET
OPERATING
MODEL
(TOM)
..............................................
206
11.3.3
DATA
POLICIES
..............................................................................
207
11.3.4
DATA
TOOLS
..................................................................................
207
XV
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
11.4
SCALING
UP
STATE-OF-THE-ART
NFR
DATA
GOVERNANCE
................................
208
11.4.1
SPECIFIC
ROLES
AND
RESPONSIBILITIES
..............................................
210
11.4.2
TOOL
OPTIMISATION
........................................................................
212
11.5
CONCLUSION
................................................................................................
212
12
OPTIMISING
EFFECTIVENESS
AND
EFFICIENCY:
DEPLOYMENT
OF
ARTIFICIAL
INTELLIGENCE
IN
NON-FINANCIAL
RISK
MANAGEMENT
................................
213
DR.
JOCHEN
PAPENBROCK,
DR.
JOHN
ASHLEY,
DR.
GEORG
LIENKE,
FLORIAN
SEIFERLEIN,
NORBERT
GITTFRIED
12.1
INTRODUCTION
............................................................................................
213
12.2
FINANCIAL
SECTOR
DIGITISATION:
THE
FRONT-TO-BACK
CASE
FOR
AI
................
213
12.2.1
DIGITAL
TRANSFORMATION
OF
BUSINESS
AND
OPERATING
MODELS
....
214
12.2.1.1
CHANGED
CUSTOMER
EXPECTATIONS
AND
BEHAVIOUR
........
214
12.2.1.2
INCREASING
EFFICIENCY
CHALLENGES
..................................
214
12.2.2
IMPACT
OF
COVID-19
................................................................
214
12.2.2.1
ACCELERATOR
OF
DIGITISATION
............................................
215
12.2.2.2
MODIFIED
RISK
ENVIRONMENT
..........................................
215
12.3
REGULATORY
APPROACH
TO
ARTIFICIAL
INTELLIGENCE
........................................
216
12.3.1
OVERVIEW
.....................................................................................
216
12.3.1.1
EUROPEANUNION
..........................................................
216
12.3.1.1.1
EUROPEAN
COMMISSION
..............................
216
12.3.1.1.2
EUROPEAN
BANKING
AUTHORITY
..................
217
12.3.1.1.3
NATIONAL
FINANCIAL
SUPERVISORS
..................
218
12.3.1.2
UNITED
STATES
................................................................
218
12.3.1.3
HONG
KONG
..................................................................
219
12.3.1.4
SINGAPORE
......................................................................
219
12.3.2
SUMMARY
OF
KEY
REGULATORY
EXPECTATIONS
..................................
219
12.3.2.1
GOVERNANCE
..................................................................
219
12.3.2.2
DESIGN
AND
DEVELOPMENT
..............................................
219
12.3.2.3
ONGOING
MAINTENANCE
..................................................
220
12.4
MACHINE
LEARNING
ALGORITHMS:
KEY
LEARNING
MODES
AND
EXAMPLES
....
221
12.4.1
SUPERVISED
LEARNING
.....................................................................
223
12.4.2
UNSUPERVISED
LEARNING
...............................................................
223
12.4.3
REINFORCEMENT
LEARNING
.............................................................
223
12.4.4
DEEP
LEARNING
..............................................................................
224
12.5
DEPLOYMENT
OF
AI
IN
NON-FINANCIAL
RISK
MANAGEMENT
..........................
225
12.5.1
FINANCIAL
CRIME
PREVENTION:
BIOMETRIC
CUSTOMER
IDENTIFICATION,
DYNAMIC
CRR
CALCULATION
AND
AL-BASED
TRANSACTION
SCREENING
225
12.5.1.1
KNOW
YOUR
CUSTOMER:
AUTOMATED
BIOMETRIC
IDENTI
FICATION
OF
CUSTOMERS
....................................................
225
12.5.1.2
DYNAMIC
CALCULATION
OF
CUSTOMER
RISK
RATINGS:
FASTER
REACTION
TO
MATERIAL
CHANGES
IN
CLIENT
RISK
PROFILES
..
.
226
12.5.1.2.1
AUTOMATIC
DATA
IMPORT
INTO
THE
CRR
SYSTEM
........................................
226
12.5.1.2.2
DYNAMIC
RECALCULATION
OF
CUSTOMER
RISK
RATINGS
........................................
227
XVI
TABLE
OF
CONTENTS
12.5.1.3
NEGATIVE
NEWS
SCREENING:
AL-SUPPORTED
REDUCTION
OF
SCREENING
EFFORTS
..........................................................
227
12.5.1.3.1
MATCHING
OF
CUSTOMER
NAMES
TO
NEGATIVE
NEWS
............................................................
227
12.5.1.3.2
CONTEXTUAL
PRE-EVALUATION
OF
NEWS
ARTI
CLES
..............................................................
228
12.5.1.4
SANCTIONS
NAME
SCREENING:
AL-SUPPORTED
REDUCTION
OF
FALSE
POSITIVE
ALERTS
AND
PRE-ASSESSMENT
OF
SCREEN
ING
ALERTS
.........................................................
228
12.5.1.4.1
REDUCTION
OF
FALSE
POSITIVE
ALERTS
VIA
FEED
BACK
LOOP
....................................................
229
12.5.1.4.2
PRE-ASSESSMENT
OF
GENERATED
ALERTS
AND
OPTIMISATION
OF
MANUAL
ALERT
REVIEWS
....
229
12.5.1.5
SANCTIONS
TRANSACTION
SCREENING
.................................
230
12.5.1.6
AML
TRANSACTION
MONITORING:
DEPLOYING
ARTIFICIAL
INTELLIGENCE
TO
MANUAL
INVESTIGATIONS
...........
230
12.5.2
PREVENTION
OF
MARKET
ABUSE:
AL-BASED
DETECTION
OF
IRREGULARI
TIES
IN
SECURITIES
TRADING
.................................................
231
12.5.2.1
BEHAVIOUR-BASED
TRACKING
OF
TRADING
PORTFOLIOS:
AI-
BASED
DETECTION
OF
IRREGULAR
TRANSACTIONS
...
231
12.5.2.2
AL-BASED
ASSESSMENT
OF
TRADER
S
VOICE
AND
EMAIL
COMMUNICATION
.............................................
232
12.5.3
MANAGEMENT
OF
AI
(MODEL)
RISK:
KEY
DISCIPLINE
FOR
DATA
DRIVEN
FINANCIAL
INSTITUTIONS
..........................................
232
12.5.4
AI4ESG:
TECH-DRIVEN
SUSTAINABLE
FINANCE
................................
235
12.5.5
AI
INFRASTRUCTURE
FOR
NON-FINANCIAL
RISK
MANAGEMENT
.............
236
12.6
CONCLUSION
..............................................................................................
239
13
CORE
ELEMENTS
OF
CONDUCT
AND
ETHICS
IN
THE
CONTEXT
OF
NON
FINANCIAL
RISK
...........................................................................................
241
DR.
BARBARA
ROTH,
DR.
ERASMUS
FABER,
DR.
JULIA
GEBHARDT,
DR.
KATHARINA
HEFTER
13.1
CONDUCT
RISK:
DEFINITIONS,
CHARACTERISTICS
AND
REGULATORY
LANDSCAPE
..
241
13.1.1
CONDUCT
AND
COMPLIANCE,
ETHICS
VERSUS
INTEGRITY
....................
241
13.1.1.1
FINDING
COMMON
GROUND:
DEFINITION
OF
KEY
TERMS
..
241
13.1.1.2
CONDUCT-BASED
VERSUS
INTEGRITY-BASED
ETHICS
............
243
13.1.1.3
AN
INTEGRATIVE
APPROACH
FOR
SYNTHESISING
CONDUCT-/
COMPLIANCE-BASED
AND
INTEGRITY-BASED
ETHICS
............
244
13.1.2
WHAT
IS
MEANT
WHEN
WE
TALK
ABOUT
CONDUCT
RISK?
..................
246
13.1.2.1
NO
UNIVERSAL
DEFINITION
..............................................
246
13.1.2.2
THREE
KEY
TOPICS:
MARKET,
CLIENT
AND
EMPLOYEE
CONDUCT
RISK
...................................................
247
13.1.3
CONDUCT
RISK
IN
THE
NFR
TAXONOMY
........................................
249
XVII
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
13.2
REGULATORY
LANDSCAPE
..............................................................................
250
13.2.1
EUROPEAN
PERSPECTIVE
.................................................................
252
13.2.1.1
EUROPEAN/UK
REGULATORS
............................................
252
13.2.1.2
OTHER
EUROPEAN
COUNTRIES
..........................................
257
13.2.2
US
PERSPECTIVE
...........................................................................
260
13.2.3
ASIA-PACIFIC
PERSPECTIVE
.............................................................
262
13.3
WHY
CONDUCT
RISK
MATTERS
......................................................................
265
13.3.1
INCREASED
REGULATORY
SCRUTINY
...................................................
265
13.3.1.1
FOCUS
ON
REGULATORY
OVERSIGHT
....................................
265
13.3.1.2
FREQUENCY
OF
REGULATORY
ACTIONS
................................
266
13.3.2
SUPERVISORY
AND
LEGAL
ACTIONS
...................................................
267
13.3.2.1
ACTIONS
AGAINST
FIRMS
....................................................
267
13.3.2.2
ACTIONS
AGAINST
INDIVIDUALS
..........................................
268
14
MANAGING
CONDUCT
RISK:
FRAMEWORK
AND
PERSPECTIVES
..........................
271
PROF.
DR.
MARTIN
SCHULZ,
DR.
JULIA
GEBHARDT,
DR.
KATHARINA
HEFTER,
RENE
BYSTRON
14.1
TRENDS
AND
PERSPECTIVES
IN
RESPECT
OF
CONDUCT
RISK
IN
THE
REGULATORY
CONTEXT
......................................................................................................
271
14.1.1
TREATING
CUSTOMERS
FAIRLY
(TCF)
..............................................
271
14.1.2
SENIOR
MANAGEMENT
REGIMES
AS
EMERGING
GLOBAL
TRENDS
IN
CONDUCT
RISK
......................................................................
273
14.1.2.1
UK
..................................................................................
273
14.1.2.2
HONG
KONG
AND
SINGAPORE
..........................................
275
14.1.2.3
MALAYSIA
........................................................................
275
14.1.2.4
AUSTRALIA
........................................................................
276
14.2
CONDUCT
RISK
MANAGEMENT
AS
INTEGRAL
PART
OF
ESG
............................
277
14.2.1
G
LIKE
CONDUCT
..............................................................................
277
14.2.2
NEW
LEGISLATIVE
FOCUS
AND
RECENT
REGULATORY
DEVELOPMENTS
.
.
.
277
14.2.3
ACTIVITIES
AT
THE
EU
LEVEL
............................................................
278
14.2.4
OPTIMISING
ESG
RISK
MANAGEMENT
............................................
280
14.3
MANAGING
CONDUCT
RISK
............................................................................
281
14.3.1
THE
CONDUCT
RISK
HOUSE
..........................................................
281
14.3.2
BUILDING
A
CONDUCT
RISK
FRAMEWORK
........................................
282
15
SUCCESSFUL
ESG
TRANSITION:
IMPLICATIONS
AND
CHALLENGES
FOR
EFFECTIVE
RISK
MANAGEMENT
...................................................................................
285
ANITA
VARSHNEY,
JANNIK
LEIENDECKER,
AYTECH
PSEUNOKOV
15.1
INTRODUCTION
...........................................................................................
285
15.2
REGULATORY
FRAMEWORKS
IN
SELECTED
KEY
JURISDICTIONS
..........................
287
15.2.1
GENERAL
OVERVIEW
.......................................................................
287
15.2.2
EUROPEANUNION
.........................................................................
288
15.2.2.1
NON-FINANCIAL
REPORTING
DIRECTIVE
&
CORPORATE
SUSTAINABILITY
REPORTING
DIRECTIVE
..............................
289
15.2.2.2
SUSTAINABLE
FINANCE
TAXONOMY
.....................................
290
XVIII
TABLE
OF
CONTENTS
15.2.2.3
EU
DISCLOSURE
REGULATION
..........................................
293
15.2.2.4
EU
PRUDENTIAL
REGULATIONS
........................................
293
15.2.3
UNITED
STATES
..............................................................................
295
15.2.4
HONG
KONG
..................................................................................
298
15.2.5
SINGAPORE
....................................................................................
299
15.3
SUSTAINABLE
FINANCE:
UPCOMING
CHALLENGES
FOR
COMPANIES
.....................
300
15.4
TARGET
PICTURE:
EFFECTIVE
MANAGEMENT
OF
ESG
RISK
..............................
303
15.4.1
ESG
STRATEGY
...............................................................................
303
15.4.2
GOVERNANCE
AND
ORGANISATION
...................................................
305
15.4.3
ESG
RISK
STEERING
.......................................................................
307
15.4.4
IDENTIFICATION
OF
ENABLING
FACTORS
.............................................
310
15.4.5
ESG
AS
AN
OPPORTUNITY
..............................................................
311
15.5
CONCLUSION
..............................................................................................
312
BIBLIOGRAPHY
............................................................................................................
315
XIX
|
| adam_txt |
TABLE
OF
CONTENTS
TABLE
OF
CONTENTS
.
V
EDITORS
.
XXI
CONTRIBUTORS
.
XXII
FOREWORD
.
XXV
1
INTRODUCTION:
RISING
TO
THE
CHALLENGES
OF
NON-FINANCIAL
RISK
MANAGEMENT,
COMPLIANCE
AND
ESG
.
1
PROF.
DR.
DOUGLAS
ARNER,
DR.
BERNHARD
GEHRA,
JANNIK
LEIENDECKER,
DR.
GEORG
LIENKE
1.1
NEW
RISKS
AND
CHALLENGES
.
1
1.2
A
FORWARD-LOOKING
SOLUTION
FOR
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
.
2
1.3
DEFINING
AND
ALIGNING
NON-FINANCIAL
RISK
CATEGORIES
.
2
1.4
ESTABLISHING
A
NON-FINANCIAL
RISK
APPETITE
FRAMEWORK
TO
PREVENT
AN
UNDESIRABLE
RISK-TAKING
.
3
1.5
BUILDING
KEY
GOVERNANCE
AND
ORGANISATIONAL
PILLARS
FOR
NON-FINANCIAL
RISK
MANAGEMENT
.
3
1.6
GENERATING
EXCELLENCE
IN
THE
NON-FINANCIAL
RISK
MANAGEMENT
LIFECYCLE
4
1.7
USING
DATA,
IT
AND
ARTIFICIAL
INTELLIGENCE
.
5
1.8
PUTTING
CONDUCT
AND
ETHICS
AT
THE
CENTRE
OF
SUSTAINABLE
NON-FINANCIAL
RISK
MANAGEMENT
.
6
1.9
ENVIRONMENT,
SOCIAL
AND
GOVERNANCE:
IMPLICATIONS
FOR
EFFECTIVE
RISK
MANAGEMENT
.
7
2
DEFINITION
OF
NON-FINANCIAL
RISK
IN
FINANCIAL
INSTITUTIONS
.
9
MARTINA
MIETZNER,
DR.
JULIA
GEBHARDT,
DR.
KATHARINA
HEFTER,
JENNIFER
RABENER,
DR.
CARSTEN
WIEGAND
2.1
INTRODUCTION
.
9
2.2
HISTORY
OF
NON-FINANCIAL
RISK
AND
SPECIFICATIONS
BY
KEY
REGULATORS
.
11
2.2.1
A
SHORT
HISTORY
OF
NON-FINANCIAL
RISK
.
12
2.2.2
EXISTING
NON-FINANCIAL
RISK
SPECIFICATIONS
BY
KEY
GLOBAL
AND
REGIONAL
REGULATORS
AND
ASSOCIATIONS
.
15
2.3
DIFFERENTIATION
OF
FINANCIAL
AND
NON-FINANCIAL
RISK
.
16
2.3.1
FINANCIAL
RISK
DEFINITION
.
17
2.3.2
NON-FINANCIAL
RISK
DEFINITION
.
18
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
2.4
SPECIFIC
CLUSTERS
OF
NON-FINANCIAL
RISK
.
18
2.4.1
OPERATIONAL
RISK
.
21
2.4.1.1
FINANCIAL
CRIME
RISK
.
21
2.4.1.1.1
MONEY-LAUNDERING/TERRORIST
FINANCING
RISK
22
2.4.1.1.2
SANCTIONS
AND
EMBARGOES
RISK
.
22
2.4.1.1.3
BRIBERY
AND
CORRUPTION
RISK
.
23
2.4.1.1.4
FACILITATION
OF
TAX
EVASION
.
23
2.4.1.2
CONDUCT
RISK
.
24
2.4.1.2.1
MARKET
CONDUCT
RISK
.
24
2.4.1.2.2
CLIENT
CONDUCT
RISK
.
25
2.4.1.2.3
EMPLOYEE
CONDUCT
RISK
.
25
2.4.1.3
REGULATORY
COMPLIANCE
RISK
.
25
2.4.1.4
FRAUD
RISK
.
26
2.4.1.4.1
ACCOUNT-OPENING
FRAUD
RISK
.
27
2.4.1.4.2
DEBT/CREDIT
CARD
FRAUD
RISK
.
27
2.4.1.4.3
FRAUDULENT
PAPER-BASED
PAYMENT
TRANS
ACTIONS
RISK
.
28
2.4.1.4.4
ONLINE
BANKING
FRAUD
RISK
.
28
2.4.1.4.5
CREDIT
FRAUD
RISK
.
28
2.4.1.4.6
THEFT
RISK
.
28
2.4.1.4.7
EMBEZZLEMENT/BREACH
OF
TRUST
RISK
.
28
2.4.1.4.8
ANTITRUST
VIOLATION
RISK
.
29
2.4.1.4.9
BALANCE
SHEET
MANIPULATION
.
29
2.4.1.5
INFORMATION,
COMMUNICATION
&
TECHNOLOGY
(ICT)
AND
CYBER
RISK
.
29
2.4.1.5.1
DATA
CONFIDENTIALITY
RISK
.
31
2.4.1.5.2
DATA
AVAILABILITY
RISK
.
32
2.4.1.5.3
DATA
INTEGRITY
RISK
.
32
2.4.1.5.4
INFORMATION
SECURITY
RISK
.
32
2.4.1.6
DATA
PRIVACY
AND
BANK
SECRECY
RISK
.
33
2.4.1.6.1
DATA
PRIVACY
RISK
.
33
2.4.1.6.2
BANK
SECRECY
RISK
.
34
2.4.1.7
RESILIENCE
RISK
.
34
2.4.1.8
OUTSOURCING
AND
VENDOR
RISK
.
35
2.4.1.8.1
INTRAGROUP
OUTSOURCING
RISK
.
36
2.4.1.8.2
EXTERNAL
OUTSOURCING
RISK
.
36
2.4.1.8.3
VENDOR
RISK
.
37
2.4.1.9
TAX
REPORTING
RISK
.
37
2.4.1.10
OTHER
OPERATIONAL
RISK
.
37
2.4.1.10.1
HUMAN
RESOURCES
RISK
.
37
2.4.1.10.2
LEGAL
RISK
.
37
2.4.1.10.3
PHYSICAL
DAMAGE
RISK
.
38
2.4.1.10.4
EXECUTION,
DELIVERY
AND
PROCESS
RISK
.
38
2.4.1.10.5
REPORTING
RISK
.
38
2.4.1.10.6
ACCOUNTING
RISK
.
39
TABLE
OF
CONTENTS
2.4.1.10.7
PROJECT
RISK
.
39
2.4.1.10.8
COMPETITION
LAW
RISK
.
39
2.4.1.10.9
MODEL
RISK
.
39
2.4.2
STRATEGIC
RISK
.
40
2.4.2.1
REPUTATIONAL
RISK
.
40
2.4.2.2
SUSTAINABILITY
RISK
.
41
2.4.2.2.1
CLIMATE
CHANGE
RISK
.
41
2.4.2.2.2
HUMAN
RIGHTS
RISK
.
42
2.4.2.3
BUSINESS
RISK
.
42
2.4.2.3.1
FORECASTING
RISK
.
42
2.4.2.3.2
INORGANIC
GROWTH
RISK
.
43
2.4.2.3.3
NEW
BUSINESS
RISK
.
43
2.4.2.3.4
INVESTOR
RELATIONS
RISK
.
43
2.5
CONCLUSION
AND
OUTLOOK
.
43
3
RISK
BOUNDARIES
-
SETTING
AN
ANALYTICAL
RISK
APPETITE
FRAMEWORK
FOR
NON-FINANCIAL
RISKS
.
45
FEDERICO
TRUFFELLI,
DR.
ULRICH
GORES,
LORENZO
FANTINI,
MICHELE
RIGONI,
LUCA
RANCAN
3.1
INTRODUCTION
.
45
3.1.1
REGULATORY
REQUIREMENTS
.
45
3.1.2
RAF
IN
PRACTICE
.
47
3.2
RAF
LEVEL
1:
OVERALL
RISK
APPETITE
STATEMENT
.
49
3.2.1
OVERALL
STATEMENT
.
49
3.2.2
PROHIBITED
ACTIVITIES
.
51
3.3
RAF
LEVEL
2:
RISK
APPETITE
METRICS
.
51
3.3.1
DEFINING
APPROPRIATE
METRICS
.
51
3.3.2
METRICS:
SETTING
THE
THRESHOLDS
.
52
3.3.2.1
THRESHOLDS
BASED
ON
BENCHMARK
AND
HISTORICAL
INTERNAL
LOSS
DATA
FOR
A
METRIC
BASED
ON
OPERATIONAL
LOSSES
.
53
3.3.2.2
THRESHOLDS
BASED
ON
RESIDUAL
RISK
LEVELS
FOR
A
METRIC
BASED
ON
RISK
ASSESSMENT
.
54
3.4
RAF
LEVEL
3:
KEY
RISK
INDICATORS
.
55
3.4.1
SELECTING
KEY
RISK
INDICATORS
.
55
3.4.1.1
CANDIDATE
INDICATORS
IDENTIFICATION
.
56
3.4.1.2
APPETITE
TRACKING
SUITABILITY
.
56
3.4.1.3
EXPERT
JUDGEMENT
.
56
3.4.2
KRIS:
SETTING
AND
CALIBRATING
THE
THRESHOLDS
.
60
3.4.2.1
THRESHOLD
CALIBRATION
BASED
ON
HISTORICAL
DATA
ANALYSIS
AND
PERCENTILES
.
60
3.4.2.2
THRESHOLD
FINE-TUNING
BASED
ON
BENCHMARKING
AND
BACKTESTING
.
62
VII
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
3.5
RAF
GOVERNANCE
.
63
3.5.1
RAF
DESIGN
AND
UPDATE
.
64
3.5.2
RAF
MONITORING
AND
REPORTING
.
65
3.5.3
RAF
THRESHOLD
BREACHES
AND
ESCALATION
.
66
3.5.4
ACTION
PLAN
DEFINITION
.
68
4
THE
THREE
LINES
OF
DEFENCE
MODEL:
KEY
SUCCESS
FACTORS
FOR
EFFECTIVE
RISK
MANAGEMENT
.
71
DR.
OLIVER
ENGELS,
MARC
PETER
KLEIN,
PETER
GIIRTLSCHMIDT,
DR.
GEORG
LIENKE,
REI
TANAKA
4.1
INTRODUCTION
.
71
4.2
REGULATORY
FRAMEWORK
IN
SELECTED
KEY
JURISDICTIONS
.
72
4.2.1
EUROPEANUNION
.
72
4.2.2
UNITED
STATES
OF
AMERICA
.
73
4.2.3
HONG
KONG
.
73
4.2.4
SINGAPORE
.
73
4.2.5
RISK-TYPE-SPECIFIC
QUALIFICATIONS
OF
THE
3LOD
MODEL:
FINANCIAL
CRIME
PREVENTION
.
74
4.2.5.1
EU:
REMAINING
COUNTRY-SPECIFIC
VARIATION
IN
1
ST
AND
2ND
LOD
MANDATE
.
74
4.2.5.2
UNITED
STATES
OF
AMERICA:
BSA
COMPLIANCE
OFFICER
.
74
4.2.5.3
HONG
KONG:
MONEY
LAUNDERING
REPORTING
OFFICER
AND
COMPLIANCE
OFFICER
.
75
4.3
KEY
ROLES
AND
RESPONSIBILITIES
OF
1
ST
,
2ND
AND
3
RD
LOD
.
75
4.3.1
THE
FIRST
LINE
OF
DEFENCE:
RISK
OWNER
.
76
4.3.1.1
SCOPE
OF
1
ST
LOD
MANDATE
.
76
4.3.1.1.1
RISK
OWNERSHIP
.
76
4.3.1.1.2
IMPLEMENTATION
AND
EXECUTION
OF
1ST
LOD
CONTROLS
.
76
4.3.1.2
ALLOCATION
OF
1
ST
LOD
RESPONSIBILITY
.
76
4.3.1.3
1
ST
LOD
RISK-COORDINATING
FUNCTION
(1.5
TH
LOD)
.
77
4.3.1.3.1
COORDINATION
OF
RISK
MANAGEMENT
ACTIVI
TIES
.
77
4.3.1.3.2
INTERFACE
TO
2ND
LOD
.
77
4.3.1.3.3
REGULATORY
ADVISOR
.
77
4.3.2
THE
SECOND
LINE
OF
DEFENCE:
INTERNAL
CONTROL
FUNCTIONS
.
78
4.3.2.1
SCOPE
OF
2ND
LOD
MANDATE
.
78
4.3.2.1.1
STANDARD
SETTING
.
78
4.3.2.1.2
TESTING
OF
1
ST
LOD
CONTROLS
.
79
4.3.2.1.3
RISK
ASSESSMENT
.
79
4.3.2.1.4
TRAINING
AND
ADVISORY
.
79
4.3.2.2
RISK
MATERIALITY
AND
CORRESPONDING
INTENSITY
OF
2ND
LOD
RISK
OVERSIGHT
.
79
VIII
TABLE
OF
CONTENTS
4.3.2.3
INDEPENDENCE
OF
2
ND
LOD
RISK
OVERSIGHT
.
80
4.3.2.3.1
ORGANISATIONAL
INDEPENDENCE
.
80
4.3.2.3.2
FUNCTIONAL
INDEPENDENCE
.
80
4.3.2.3.3
INTERNAL
CONTROL
FUNCTIONS
PERFORMING
1ST
LOD
ACTIVITIES
.
81
4.3.2.4
KEY
SUCCESS
FACTORS
FOR
EFFECTIVE
2ND
LOD
RISK
OVERSIGHT
.
82
4.3.2.4.1
METHODOLOGY
CONSISTENCY
ACROSS
2
ND
LOD
FUNCTIONS
.
82
4.3.2.4.2
BODIES
AND
COMMITTEES:
ADEQUATE
2
ND
LOD
PARTICIPATION
AND
INFORMATION
SHARING
.
83
4.3.2.4.3
APPOINTMENT
OF
PRIMUS
INTER
PARES
NON
FINANCIAL
RISK
GOVERNANCE
FUNCTION
.
84
4.3.3
THE
THIRD
LINE
OF
DEFENCE:
INTERNAL
AUDIT
AS
PROVIDER
OF
INDEPENDENT
ASSURANCE
.
85
4.3.3.1
INDEPENDENT
ASSURANCE
.
85
4.3.3.1.1
ADEQUACY
OF
RISK
MANAGEMENT
FRAMEWORK
85
4.3.3.1.2
DESIGN
AND
OPERATING
EFFECTIVENESS
.
85
4.3.3.1.3
COMPLIANCE
WITH
REGULATORY
REQUIREMENTS
AND
INTERNAL
STANDARDS
.
86
4.3.3.2
ADVISING
THE
BOARD
OF
DIRECTORS
.
86
4.4
COMMON
PITFALLS
OF
THE
3LOD
MODEL
AND
PRECAUTIONARY
MEASURES
.
.
86
4.4.1
INSUFFICIENT
RISK
OWNERSHIP
BY
1
ST
LOD
.
86
4.4.2
LACK
OF
2ND
LOD
EXPERTISE
.
87
4.4.3
INADEQUATE
ASSURANCE
BY
3
RD
LOD
.
87
4.5
CONCLUSION
.
88
5
GLOBAL
FUNCTIONAL
LEAD
IN
NON-FINANCIAL
RISK
MANAGEMENT:
ENSURING
CONSISTENCY
AND
INTEGRATION
IN
COMPLEX
ORGANISATIONS
.
89
ULRIKE
BROUZI,
DR.
MICHAEL
LANGE,
P.
ROBERT
MIESZKOWSKI,
JANNIK
LEIENDECKER,
DR.
GEORG
LIENKE,
FLORIAN
SEIFERLEIN,
NORBERT
GITTFRIED,
REI
TANAKA
5.1
INTRODUCTION
.
89
5.2
REGULATORY
FRAMEWORK
IN
SELECT
KEY
MARKETS
.
91
5.2.1
EUROPEANUNION
.
91
5.2.2
UNITED
STATES
OF
AMERICA
.
91
5.2.3
HONG
KONG
.
92
5.2.4
SINGAPORE
.
92
5.3
GLOBAL
FUNCTIONAL
LEAD:
INDIVIDUAL
CORPORATE
PARAMETERS
TO
CONSIDER
.
92
5.3.1
CORPORATE
CULTURE
.
92
5.3.2
ORGANISATION
'
S
COMPLEXITY
.
93
5.3.3
IT
LANDSCAPE
.
93
5.3.4
GEOGRAPHICAL
FOOTPRINT
.
93
IX
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
5.4
MAJOR
COMPONENTS
OF
GLOBAL
FUNCTIONAL
LEAD
IN
NON-FINANCIAL
RISK
MANAGEMENT
.
93
5.4.1
OPERATING
MODEL:
STRIKING
A
BALANCE
BETWEEN
GLOBAL
STANDARDS
AND
REGIONAL
EXECUTION
.
94
5.4.1.1
REGULATORY
HORIZON
SCREENING
.
95
5.4.1.2
SETTING
OF
RISK-SPECIFIC
STANDARDS
.
96
5.4.1.3
TRAINING
AND
ADVISORY
.
97
5.4.1.4
CONTROLS
BY
THE
1
ST
AND
2ND
LINE
OF
DEFENCE
.
97
5.4.1.5
NON-FINANCIAL
RISK
ASSESSMENT
.
98
5.4.1.6
NON-FINANCIAL
RISK
REPORTING
.
99
5.4.1.7
GROUP
RISK
OVERSIGHT
.
99
5.4.2
REPORTING
LINES:
ESTABLISHING
IMPLEMENTATION
ACCOUNTABILITY
IN
VERTICAL
FUNCTIONS
.
100
5.4.2.1
SOLID
REPORTING
LINES
INTO
LOCAL
LEGAL
ENTITY
AND
BRANCH
100
5.4.2.2
DOTTED
REPORTING
LINES
INTO
GLOBAL
RISK
MANAGEMENT
ORGANISATION
.
101
5.4.3
MEETING
GOVERNANCE:
SUPPORTING
EFFECTIVE
MANAGEMENT
OF
A
GLOBAL
RISK
FUNCTION
.
101
5.5
CONCLUSION
.
102
6
POLICIES
AND
PROCEDURES:
FRAMEWORK
AND
GOVERNANCE
REQUIREMENTS
IN
THE
FINANCIAL
SECTOR
.
105
DR.
ERASMUS
FABER,
BJORN
STAUBER,
DR.
GEORG
LIENKE
6.1
INTRODUCTION
.
105
6.2
REGULATORY
FRAMEWORK
IN
SELECTED
KEY
JURISDICTIONS
.
105
6.2.1
EUROPEAN
BANKING
AUTHORITY
(EBA)
.
106
6.2.2
US
REGULATORS
.
106
6.2.2.1
THE
FEDERAL
RESERVE
.
106
6.2.2.2
OFFICE
OF
THE
COMPTROLLER
OF
THE
CURRENCY
.
107
6.2.3
HONG
KONG
MONETARY
AUTHORITY
.
107
6.2.4
MONETARY
AUTHORITY
OF
SINGAPORE
.
108
6.3
POLICY
FRAMEWORK:
KEY
IMPLICATIONS
FOR
A
TARGET
CONCEPT
.
109
6.3.1
STATUS
QUO:
NEED
FOR
STRUCTURED
APPROACH
.
109
6.3.1.1
LACK
OF
A
HARMONISED
APPROACH
.
109
6.3.1.2
POLICY
GAPS
AND
REDUNDANCIES
.
109
6.3.2
POLICY
FRAMEWORK:
DESIGN
CONCEPT
AND
HIERARCHIES
.
110
6.3.2.1
DESIGN
CONCEPT:
KEY
HYPOTHESES
FOR
AN
EFFECTIVE
POLICY
FRAMEWORK
.
110
6.3.2.1.1
HARMONISED
DESIGN
APPROACH
.
110
6.3.2.1.2
COMPLETENESS
.
110
6.3.2.1.3
UNIFORM
NAMING
CONVENTION
.
110
6.3.2.1.4
PRECISE
WORDING
.
ILL
6.3.2.1.5
ASSIGNMENT
OF
RESPONSIBILITIES
.
ILL
6.3.2.1.6
GOVERNANCE
RULES
.
ILL
6.3.2.1.7
LINKAGE
TO
INTERNAL
PROCESSES
AND
CONTROLS
111
X
TABLE
OF
CONTENTS
6
.2.2.2
SUGGESTED
HIERARCHY
LEVELS:
KEY
CRITERIA
AND
EXAMPLES
111
6.3.2.3
LEVEL
ONE:
OVERARCHING
RISK
STRATEGIES,
POLICIES
AND
DOCUMENTS
-
RISK
AND
BUSINESS
SEGMENT
AGNOSTIC
.
112
6.2.2.3.1
KEY
CRITERIA
.
112
6.3.2.3.2
KEY
RISK
TYPE
AND
BUSINESS
SEGMENT
AGNOSTIC
TOPICS
.
112
6.3.2.4
LEVEL
TWO:
RISK-TYPE-SPECIFIC
POLICIES
AND
PROCEDURES
113
6.3.2.4.1
KEY
CRITERIA
.
113
6.3.2.4.2
RISK-TYPE-SPECIFIC
DOCUMENTS
.
113
6.3.2.5
LEVEL
THREE:
CUSTOMER-RELATED
AND
BUSINESS-SPECIFIC
POLICIES
AND
PROCEDURES
.
114
6.3.2.5.1
KEY
CRITERIA
.
114
6.3.2.5.2
CUSTOMER-RELATED
AND
BUSINESS-SPECIFIC
TOPICS
.
115
6.3.2.6
LEVEL
FOUR:
POLICIES
AND
PROCEDURES
IN
INTERNATIONAL
LOCATIONS
.
115
6.3.2.6.1
SCOPE
OF
APPLICABILITY:
SUBSIDIARY
COMPANIES
AND
BRANCH
OFFICES
.
115
6.3.2.6.2
KEY
CRITERIA
.
115
6.4
POLICY
GOVERNANCE,
REPOSITORY
AND
WORKFLOW
TOOL
.
116
6.4.1
APPROVAL
OF
POLICIES
AND
PROCEDURES
.
117
6.4.1.1
LEVEL
ONE:
BOARD
OF
DIRECTORS
.
117
6.4.1.2
LEVEL
TWO:
RESPONSIBLE
BOARD
MEMBER
.
117
6.4.1.3
LEVEL
THREE:
SENIOR
MANAGEMENT
ON
N-1
LEVEL
.
117
6.4.1.4
LEVEL
FOUR:
GENERAL
MANAGER
OR
2ND
LOD
N-1
.
117
6.4.2
AUTHORSHIP,
OWNERSHIP,
CREATION
AS
WELL
AS
UPDATE
OF
POLICIES
AND
PROCEDURES
.
118
6.4.2.1
DOCUMENT
AUTHORSHIP
.
118
6.4.2.2
DOCUMENT
OWNERSHIP
.
118
6.4.2.3
DOCUMENT
CREATION
PROCESS
.
118
6.4.2.4
STRINGENT
MANAGEMENT
OF
UPDATE
PROCESS
.
118
6.4.2.4.1
REGULAR
VALIDATION
BASED
ON
TIME
INTERVALS
119
6.4.2.4.2
AD
HOC
UPDATES
.
119
6.4.3
POLICY
REPOSITORY,
INCLUDING
WORKFLOW
TOOL:
CENTRALISED
MANAGEMENT
OF
POLICIES
AND
PROCEDURES
.
119
6.4.3.1
FACILITATION
OF
ACCESS
.
120
6.4.3.2
DOCUMENT
LIFECYCLE
MANAGEMENT
.
120
6.4.3.2.1
REGULAR
VALIDATION
OF
DOCUMENTS
.
120
6.4.3.2.2
AD
HOC
UPDATES
.
120
6.4.3.2.2.1
CHANGES
IN
BUSINESS
AND
OPER
ATING
MODEL
.
120
6.4.3.2.2.2
CHANGES
IN
REGULATORY
FRAME
WORK
.
121
6.4.3.3
AUDIT-PROOF
CHANGE
LOG
.
121
6.5
CONCLUSION
.
121
XI
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
7
TOP-DOWN
RISK
AND
CONTROL
ASSESSMENT:
A
FORWARD-LOOKING
APPROACH
TO
EVALUATE
COMPANY-WIDE
NON-FINANCIAL
RISK
EXPOSURE
.
123
HURDOGAN
IRMAK,
BURCU
NASUHOGLU,
DR.
ERASMUS
FABER,
LORENZO
FANTINI,
BENEDETTA
TESTINO,
JANNIK
LEIENDECKER,
BARBARA
FOJCIK,
DR.
GEORG
LIENKE
7.1
INTRODUCTION
123
7.2
TOP-DOWN
VS.
BOTTOM-UP:
DIFFERENT
APPROACHES
BASED
ON
DESIRED
OUTCOMES
.
124
7.2.1
APPROACHES:
RISK-SPECIFIC
FOCUS
VS.
OVERARCHING
NON-FINANCIAL
RISK
COVERAGE
.
124
7.2.1.1
BOTTOM-UP
APPROACH:
RISK-SPECIFIC,
GRANULAR
FOCUS
.
125
7.2.1.2
TOP-DOWN
APPROACH:
OVERARCHING,
HOLISTIC
NON
FINANCIAL
RISK
COVERAGE
.
125
7.2.2
POTENTIAL
OUTCOMES:
DIFFERENT
SCOPE
OF
RISK-COVERAGE
AND
LEVEL
OF
GRANULARITY
.
126
7.3
KEY
SUCCESS
FACTORS:
MAXIMISING
THE
EFFECTIVENESS
OF
TOP-DOWN
RISK
AND
CONTROL
ASSESSMENTS
.
126
7.4
REGULATORY
FRAMEWORK,
BEST
PRACTICE
AND
STANDARD
SETTER
GUIDELINES
.
.
127
7.4.1
COSO
ERM
FRAMEWORK
.
127
7.4.2
BANK
FOR
INTERNATIONAL
SETTLEMENTS
.
128
7.4.3
EBA
AND
ECB
.
128
7.5
METHODOLOGY
OF
TOP-DOWN
RISK
AND
CONTROL
ASSESSMENT:
EVALUATION
OF
INHERENT
RISK,
CONTROL
ADEQUACY
AND
RESIDUAL
RISK
.
129
7.5.1
NON-FINANCIAL
RISK
TAXONOMY
AS
A
STARTING
POINT
.
129
7.5.2
MEASUREMENT
OF
INHERENT
RISK
.
129
7.5.2.1
CALCULATION
OF
SEVERITY
.
130
7.5.2.1.1
ORGANISATION-SPECIFIC
RISK
INDICATORS
.
130
7.5.2.1.2
INDUSTRY
ADJUSTMENTS
.
132
7.5.2.1.3
WEIGHTING
OF
RISK
INDICATORS
BASED
ON
DATA
SOURCE
RELIABILITY
.
133
7.5.2.2
CALCULATION
OF
LIKELIHOOD
.
133
7.5.2.3
INHERENT
RISK
MATRIX
.
134
7.5.3
MEASUREMENT
OF
INTERNAL
CONTROL
ADEQUACY
.
134
7.5.3.1
CONTROL
INDICATORS
.
135
7.5.3.2
WEIGHTING
OF
CONTROL
INDICATORS
.
136
7.5.3.3
CONTROL
RATING
.
136
7.5.4
DETERMINATION
OF
RESIDUAL
RISK
.
137
7.6
BREAKOUT:
BUILDING
AN
INSTITUTION-WIDE
INTERNAL
CONTROL
SYSTEM
.
138
7.6.1
INTRODUCTION
.
138
7.6.2
ALTERNATIVE
PATH
TO
BUILDING
AN
INTERNAL
CONTROL
FRAMEWORK:
TOP-DOWN,
RISK-BASED
APPROACH
.
138
7.6.3
FIVE-STEP
APPROACH:
BUILDING
AN
INTERNAL
CONTROL
FRAMEWORK
.
139
7.6.3.1
STEP
1:
DETERMINATION
OF
NFR
CRITICALITY
.
139
7.6.3.2
STEP
2:
MAPPING
OF
KEY
RISKS
TO
PROCESS
LANDSCAPE
.
.
139
7.6.3.3
STEP
3:
DEFINITION
OF
CONTROL
OBJECTIVES,
KEY
CONTROLS
AND
CONTROL
REPOSITORY
.
140
XII
TABLE
OF
CONTENTS
7.6.3.4
STEP
4:
ASSESSMENT
OF
CONTROLS
.
140
7.6.3.5
STEP
5:
DESIGN
NFR
CONTROL
REPORT
.
141
7.7
APPROACH
TO
HANDLING
RESIDUAL
RISK
.
141
7.7.1
HIGH
RESIDUAL
RISK:
PROJECT
AND
INVESTMENT
IMPERATIVE
TO
MITIGATING
RESIDUAL
RISK
.
142
7.7.2
MEDIUM-HIGH
RESIDUAL
RISK:
ACTION
PLAN
TO
REDUCE
INHERENT
RISK
EXPOSURE
.
142
7.7
.3
MEDIUM-LOW
RESIDUAL
RISK:
CONTINUOUS
CONTROL
TESTING
AND
SELECTED
ACTION
REQUESTED
.
142
7.7.4
LOW
RESIDUAL
RISK:
PERIODIC,
RISK-BASED
CONTROLS
.
142
7.8
INTEGRATED
PROCESS
TO
PERFORM
ANNUAL
TOP-DOWN
RISK
AND
CONTROL
ASSESSMENT
.
143
7.8.1
PHASE
1:
PRE-ASSESSMENT
BY
CONTROL
FUNCTIONS
.
143
7.8.2
PHASE
2:
ASSESSMENT
BY
BUSINESS
SENIOR
MANAGEMENT
.
144
7.8.3
PHASE
3:
VALIDATION
AND
REPORTING
.
144
8
A
TOP-DOWN
APPROACH
TO
NON-FINANCIAL
RISK
REPORTING:
COLLABORATION
ACROSS
RISK
TYPES
FOR
SUSTAINABLE
RISK
STEERING
.
145
VALERIE
VILLAFRANCA,
DR.
GEORG
LIENKE,
FLORIAN
SEIFERLEIN,
KAI
GAMMELIN,
DR.
KATHARINA
HEFTER,
NORBERT
GITTFRIED
8.1
INTRODUCTION:
THE
IMPERATIVE
OF
TOP-DOWN
NON-FINANCIAL
RISK
REPORTING
.
145
8.2
REGULATORY
FRAMEWORK
IN
SELECTED
KEY
MARKETS
.
146
8.2.1
EUROPEANUNION
.
146
8.2.2
UNITED
STATES
.
147
8.2.3
HONG
KONG
.
147
8.2.4
SINGAPORE
.
148
8.3
CURRENT
STATE
OF
NON-FINANCIAL
RISK
REPORTING:
FORMATS
WITH
INCON
SISTENT
SCOPES
AND
METHODOLOGIES
.
148
8.3.1
OPERATIONAL
RISK
REPORTS
.
148
8.3.2
ADDITIONAL
2ND
LOD
REPORTS
ON
SPECIFIC
NON-FINANCIAL
RISK
TYPES
.
149
8.3.3
REPORTS
ON
INTERNAL
CONTROL
SYSTEM
.
150
8.4
KEY
PARAMETERS
OF
TOP-DOWN
NON-FINANCIAL
RISK
REPORTING:
METHODOLOGY,
REQUIRED
INPUT
AND
RESULTS
.
150
8.4.1
IDENTIFICATION
AND
EVALUATION
OF
KEY
RISK
INDICATORS
.
151
8.4.1.1
DETERMINATION
OF
KEY
RISK
INDICATORS,
THRESHOLDS
AND
POTENTIAL
INPUT
SOURCES
.
151
8.4.1.1.1
STEP
1:
UNDERSTAND
RISK
FACTORS
.
151
8.4.1.1.2
STEP
2:
IDENTIFY
KEY
RISK
INDICATORS
.
151
8.4.1.1.3
STEP
3:
DERIVE
INSTITUTION-SPECIFIC
THRESH
OLDS
.
151
XIII
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
8.4.1.2
EXAMPLE
KRIS:
FINANCIAL
CRIME
RISK,
OUTSOURCING
RISK
AND
HUMAN
RESOURCES
RISK
.
152
8.4.1.2.1
KEY
RISK
INDICATORS
FOR
FINANCIAL
CRIME
RISK
.
152
8.4.1.2.2
KEY
RISK
INDICATORS
FOR
OUTSOURCING
RISK
.
.
154
8.4.1.2.3
KEY
RISK
INDICATORS
FOR
HUMAN
RESOURCES
RISK
.
154
8.4.1.3
EVALUATION
OF
KEY
RISK
INDICATORS
.
155
8.4.2
ASSESSMENT
OF
KEY
CONTROLS
AS
RISK-MITIGATING
MEASURES
.
156
8.4.2.1
STEP
1:
CAPTURING
AND
ALLOCATION
OF
CONTROLS
.
156
8.4.2.2
STEP
2:
ASSESSMENT
OF
CONTROLS
.
158
8.4.3
DETERMINATION
OF
RESIDUAL
RISK
AND
REQUIRED
RISK-MITIGATING
ACTIONS
.
159
8.4.3.1
HIGH
LEVEL
OF
RESIDUAL
RISK
.
160
8.4.3.2
MEDIUM
LEVEL
OF
RESIDUAL
RISK
.
160
8.4.3.3
LOW
LEVEL
OF
RESIDUAL
RISK
.
161
8.5
REPORTING
PROCESS
AND
GOVERNANCE
.
161
8.5.1
GOVERNANCE
ARRANGEMENTS
.
161
8.5.1.1
BOARD
OF
DIRECTORS
.
161
8.5.1.2
CHAIRMAN
OF
THE
SUPERVISORY
BOARD
.
161
8.5.1.3
CENTRAL
REPORTING
UNIT
.
161
8.5.1.4
2ND
LOD
CONTROL
FUNCTIONS
.
162
8.5.1.5
OPERATIONAL
RISK
DEPARTMENT
.
162
8.5.2
REPORTING
PROCESS
.
162
8.6
CONCLUSION
.
163
9
INTERNAL
INVESTIGATIONS
INTO
CORPORATE
MISCONDUCT:
APPLYING
AN
INVESTIGATIVE
APPROACH
TO
ENABLE
PROACTIVE
RISK
OVERSIGHT
.
165
LORA
VON
PLOETZ,
FLORIAN
SEIFERLEIN
9.1
INTRODUCTION
.
165
9.2
SELECTED
LAWS,
REGULATIONS
AND
STANDARDS
.
166
9.2.1
SUPERVISORY
SANCTION
RELIEF
BASED
ON
VOLUNTARY
INVESTIGATION
AND
COOPERATION
.
168
9.2.1.1
JURISDICTIONS
POTENTIALLY
REDUCING
SANCTIONS
AND
EN
FORCEMENT
ACTIONS
DUE
TO
EFFECTIVE
INVESTIGATION
AND
COOPERATION
.
168
9.2.1.2
JURISDICTIONS
NOT
EXPLICITLY
PROVIDING
A
BONUS
FOR
SELF
DISCLOSURE
AND
COOPERATION
.
170
9.2.1.3
JURISDICTIONS
WHERE
INVESTIGATIONS
AND
COOPERATION
DO
NOT
CHANGE
ASSESSMENT
OF
LAW
ENFORCEMENT
.
170
9.2.2
STATUTORY
DISCLOSURE
REQUIREMENTS
.
171
9.2.3
INVESTIGATION
STANDARDS
AND
REQUIREMENTS
.
172
XIV
TABLE
OF
CONTENTS
9.3
CONCEPT
FOR
PROACTIVE
RISK
OVERSIGHT
USING
AN
INVESTIGATIVE
APPROACH
173
9.3.1
INVESTIGATION
PROCESS
.
174
9.3.1.1
PROACTIVE
RISK
MANAGEMENT
.
175
9.3.1.2
STRATEGIC
AND
TACTICAL
INVESTIGATIONS
.
177
9.3.1.3
EXAMPLE:
SANCTIONS-DRIVEN
INVESTIGATIONS
.
178
9.3.2
INFORMATION
SHARING
AND
GLOBAL
RISK
MANAGEMENT
.
181
9.3.2.1
HOW
TO
CONNECT
NEEDLES
IN
THE
SAME
HAYSTACK
(IN
A
FINANCIAL
INSTITUTION)
.
182
9.3.2.2
HOW
TO
CONNECT
NEEDLES
IN
DIFFERENT
HAYSTACKS
(BETWEEN
DIFFERENT
FINANCIAL
INSTITUTIONS)
.
183
9.4
SUCCESS
FACTORS
AND
COMMON
PITFALLS
.
185
10
TECHNICAL
APPLICATION
AND
DATA
ARCHITECTURE
FOR
NON-FINANCIAL
RISK
MANAGEMENT
.
187
KAI
GAMMELIN,
BJORN
STAUBER,
DR.
CHRISTIAN
N.
SCHMID,
DR.
JAN-OLIVER
FROHLICH,
ANNIKA
MELCHERT,
DANIEL
WAGNER
10.1
INTRODUCTION
.
187
10.1.1
A
FRAGMENTED
IT
LANDSCAPE
.
187
10.1.2
IT
'
S
IMPACT
ON
DATA
AVAILABILITY
.
190
10.1.3
DATA
AVAILABILITY
ACROSS
BORDERS
.
190
10.1.4
ADDITIONAL
CHALLENGES
ASSOCIATED
WITH
GROUP
COMPANIES
.
190
10.2
REGULATORY
REQUIREMENTS
.
192
10.3
SIX
CHALLENGES
IN
NFR
MANAGEMENT
AND
REPORTING
.
193
10.3.1
CHALLENGE
1:
THE
LACK
OF
A
DEFINED
NFR-IT
STRATEGY
.
193
10.3.2
CHALLENGE
2:
RESPONSIBILITY
FOR
AND
EXECUTION
OF
NFR
REPORT
ING-RELATED
ACTIVITIES
(OPERATIONAL
UNIT
VS.
NFR
MANAGEMENT)
194
10.3.3
CHALLENGE
3:
CONSISTENCY
AND
TRANSPARENCY
OF
IT
ARCHITECTURE
195
10.3.4
CHALLENGE
4:
ALIGNMENT
OF
DATA
ARCHITECTURE
FOR
TRANSPARENCY
ON
DATA
LINEAGE
.
196
10.3.5
CHALLENGE
5:
IMPLEMENTING
A
SOLID
IT
TARGET
ARCHITECTURE
.
197
10.3.6
CHALLENGE
6:
COST-BENEFIT
CONSIDERATIONS
.
197
10.4
A
TARGET
IT
ARCHITECTURE
FOR
NFR
.
197
10.4.1
THE
NFR
ARCHITECTURE
ECOSYSTEM
.
200
10.4.2
DASHBOARDS
AND
REPORTING
.
200
10.4.3
OTHER
KEY
ENABLING
TECHNOLOGIES
.
201
11
DATA
GOVERNANCE
IN
NON-FINANCIAL
RISK
MANAGEMENT
.
203
BJORN
STAUBER,
DR.
CHRISTIAN
N.
SCHMID,
DR.
JAN-OLIVER
FROHLICH,
ANNIKA
MELCHERT,
DANIEL
WAGNER
11.1
INTRODUCTION
.
203
11.2
REGULATORY
REQUIREMENTS
.
204
11.3
DATA
GOVERNANCE
TO
SUPPORT
NFR
MANAGEMENT
.
204
11.3.1
DATA
STRUCTURES
.
205
11.3.2
TARGET
OPERATING
MODEL
(TOM)
.
206
11.3.3
DATA
POLICIES
.
207
11.3.4
DATA
TOOLS
.
207
XV
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
11.4
SCALING
UP
STATE-OF-THE-ART
NFR
DATA
GOVERNANCE
.
208
11.4.1
SPECIFIC
ROLES
AND
RESPONSIBILITIES
.
210
11.4.2
TOOL
OPTIMISATION
.
212
11.5
CONCLUSION
.
212
12
OPTIMISING
EFFECTIVENESS
AND
EFFICIENCY:
DEPLOYMENT
OF
ARTIFICIAL
INTELLIGENCE
IN
NON-FINANCIAL
RISK
MANAGEMENT
.
213
DR.
JOCHEN
PAPENBROCK,
DR.
JOHN
ASHLEY,
DR.
GEORG
LIENKE,
FLORIAN
SEIFERLEIN,
NORBERT
GITTFRIED
12.1
INTRODUCTION
.
213
12.2
FINANCIAL
SECTOR
DIGITISATION:
THE
FRONT-TO-BACK
CASE
FOR
AI
.
213
12.2.1
DIGITAL
TRANSFORMATION
OF
BUSINESS
AND
OPERATING
MODELS
.
214
12.2.1.1
CHANGED
CUSTOMER
EXPECTATIONS
AND
BEHAVIOUR
.
214
12.2.1.2
INCREASING
EFFICIENCY
CHALLENGES
.
214
12.2.2
IMPACT
OF
COVID-19
.
214
12.2.2.1
ACCELERATOR
OF
DIGITISATION
.
215
12.2.2.2
MODIFIED
RISK
ENVIRONMENT
.
215
12.3
REGULATORY
APPROACH
TO
ARTIFICIAL
INTELLIGENCE
.
216
12.3.1
OVERVIEW
.
216
12.3.1.1
EUROPEANUNION
.
216
12.3.1.1.1
EUROPEAN
COMMISSION
.
216
12.3.1.1.2
EUROPEAN
BANKING
AUTHORITY
.
217
12.3.1.1.3
NATIONAL
FINANCIAL
SUPERVISORS
.
218
12.3.1.2
UNITED
STATES
.
218
12.3.1.3
HONG
KONG
.
219
12.3.1.4
SINGAPORE
.
219
12.3.2
SUMMARY
OF
KEY
REGULATORY
EXPECTATIONS
.
219
12.3.2.1
GOVERNANCE
.
219
12.3.2.2
DESIGN
AND
DEVELOPMENT
.
219
12.3.2.3
ONGOING
MAINTENANCE
.
220
12.4
MACHINE
LEARNING
ALGORITHMS:
KEY
LEARNING
MODES
AND
EXAMPLES
.
221
12.4.1
SUPERVISED
LEARNING
.
223
12.4.2
UNSUPERVISED
LEARNING
.
223
12.4.3
REINFORCEMENT
LEARNING
.
223
12.4.4
DEEP
LEARNING
.
224
12.5
DEPLOYMENT
OF
AI
IN
NON-FINANCIAL
RISK
MANAGEMENT
.
225
12.5.1
FINANCIAL
CRIME
PREVENTION:
BIOMETRIC
CUSTOMER
IDENTIFICATION,
DYNAMIC
CRR
CALCULATION
AND
AL-BASED
TRANSACTION
SCREENING
225
12.5.1.1
KNOW
YOUR
CUSTOMER:
AUTOMATED
BIOMETRIC
IDENTI
FICATION
OF
CUSTOMERS
.
225
12.5.1.2
DYNAMIC
CALCULATION
OF
CUSTOMER
RISK
RATINGS:
FASTER
REACTION
TO
MATERIAL
CHANGES
IN
CLIENT
RISK
PROFILES
.
.
226
12.5.1.2.1
AUTOMATIC
DATA
IMPORT
INTO
THE
CRR
SYSTEM
.
226
12.5.1.2.2
DYNAMIC
RECALCULATION
OF
CUSTOMER
RISK
RATINGS
.
227
XVI
TABLE
OF
CONTENTS
12.5.1.3
NEGATIVE
NEWS
SCREENING:
AL-SUPPORTED
REDUCTION
OF
SCREENING
EFFORTS
.
227
12.5.1.3.1
MATCHING
OF
CUSTOMER
NAMES
TO
NEGATIVE
NEWS
.
227
12.5.1.3.2
CONTEXTUAL
PRE-EVALUATION
OF
NEWS
ARTI
CLES
.
228
12.5.1.4
SANCTIONS
NAME
SCREENING:
AL-SUPPORTED
REDUCTION
OF
FALSE
POSITIVE
ALERTS
AND
PRE-ASSESSMENT
OF
SCREEN
ING
ALERTS
.
228
12.5.1.4.1
REDUCTION
OF
FALSE
POSITIVE
ALERTS
VIA
FEED
BACK
LOOP
.
229
12.5.1.4.2
PRE-ASSESSMENT
OF
GENERATED
ALERTS
AND
OPTIMISATION
OF
MANUAL
ALERT
REVIEWS
.
229
12.5.1.5
SANCTIONS
TRANSACTION
SCREENING
.
230
12.5.1.6
AML
TRANSACTION
MONITORING:
DEPLOYING
ARTIFICIAL
INTELLIGENCE
TO
MANUAL
INVESTIGATIONS
.
230
12.5.2
PREVENTION
OF
MARKET
ABUSE:
AL-BASED
DETECTION
OF
IRREGULARI
TIES
IN
SECURITIES
TRADING
.
231
12.5.2.1
BEHAVIOUR-BASED
TRACKING
OF
TRADING
PORTFOLIOS:
AI-
BASED
DETECTION
OF
IRREGULAR
TRANSACTIONS
.
231
12.5.2.2
AL-BASED
ASSESSMENT
OF
TRADER
'
S
VOICE
AND
EMAIL
COMMUNICATION
.
232
12.5.3
MANAGEMENT
OF
AI
(MODEL)
RISK:
KEY
DISCIPLINE
FOR
DATA
DRIVEN
FINANCIAL
INSTITUTIONS
.
232
12.5.4
AI4ESG:
TECH-DRIVEN
SUSTAINABLE
FINANCE
.
235
12.5.5
AI
INFRASTRUCTURE
FOR
NON-FINANCIAL
RISK
MANAGEMENT
.
236
12.6
CONCLUSION
.
239
13
CORE
ELEMENTS
OF
CONDUCT
AND
ETHICS
IN
THE
CONTEXT
OF
NON
FINANCIAL
RISK
.
241
DR.
BARBARA
ROTH,
DR.
ERASMUS
FABER,
DR.
JULIA
GEBHARDT,
DR.
KATHARINA
HEFTER
13.1
CONDUCT
RISK:
DEFINITIONS,
CHARACTERISTICS
AND
REGULATORY
LANDSCAPE
.
241
13.1.1
CONDUCT
AND
COMPLIANCE,
ETHICS
VERSUS
INTEGRITY
.
241
13.1.1.1
FINDING
COMMON
GROUND:
DEFINITION
OF
KEY
TERMS
.
241
13.1.1.2
CONDUCT-BASED
VERSUS
INTEGRITY-BASED
ETHICS
.
243
13.1.1.3
AN
INTEGRATIVE
APPROACH
FOR
SYNTHESISING
CONDUCT-/
COMPLIANCE-BASED
AND
INTEGRITY-BASED
ETHICS
.
244
13.1.2
WHAT
IS
MEANT
WHEN
WE
TALK
ABOUT
CONDUCT
RISK?
.
246
13.1.2.1
NO
UNIVERSAL
DEFINITION
.
246
13.1.2.2
THREE
KEY
TOPICS:
MARKET,
CLIENT
AND
EMPLOYEE
CONDUCT
RISK
.
247
13.1.3
CONDUCT
RISK
IN
THE
NFR
TAXONOMY
.
249
XVII
NON-FINANCIAL
RISK
MANAGEMENT
IN
THE
FINANCIAL
INDUSTRY
13.2
REGULATORY
LANDSCAPE
.
250
13.2.1
EUROPEAN
PERSPECTIVE
.
252
13.2.1.1
EUROPEAN/UK
REGULATORS
.
252
13.2.1.2
OTHER
EUROPEAN
COUNTRIES
.
257
13.2.2
US
PERSPECTIVE
.
260
13.2.3
ASIA-PACIFIC
PERSPECTIVE
.
262
13.3
WHY
CONDUCT
RISK
MATTERS
.
265
13.3.1
INCREASED
REGULATORY
SCRUTINY
.
265
13.3.1.1
FOCUS
ON
REGULATORY
OVERSIGHT
.
265
13.3.1.2
FREQUENCY
OF
REGULATORY
ACTIONS
.
266
13.3.2
SUPERVISORY
AND
LEGAL
ACTIONS
.
267
13.3.2.1
ACTIONS
AGAINST
FIRMS
.
267
13.3.2.2
ACTIONS
AGAINST
INDIVIDUALS
.
268
14
MANAGING
CONDUCT
RISK:
FRAMEWORK
AND
PERSPECTIVES
.
271
PROF.
DR.
MARTIN
SCHULZ,
DR.
JULIA
GEBHARDT,
DR.
KATHARINA
HEFTER,
RENE
BYSTRON
14.1
TRENDS
AND
PERSPECTIVES
IN
RESPECT
OF
CONDUCT
RISK
IN
THE
REGULATORY
CONTEXT
.
271
14.1.1
TREATING
CUSTOMERS
FAIRLY
(TCF)
.
271
14.1.2
SENIOR
MANAGEMENT
REGIMES
AS
EMERGING
GLOBAL
TRENDS
IN
CONDUCT
RISK
.
273
14.1.2.1
UK
.
273
14.1.2.2
HONG
KONG
AND
SINGAPORE
.
275
14.1.2.3
MALAYSIA
.
275
14.1.2.4
AUSTRALIA
.
276
14.2
CONDUCT
RISK
MANAGEMENT
AS
INTEGRAL
PART
OF
ESG
.
277
14.2.1
G
LIKE
CONDUCT
.
277
14.2.2
NEW
LEGISLATIVE
FOCUS
AND
RECENT
REGULATORY
DEVELOPMENTS
.
.
.
277
14.2.3
ACTIVITIES
AT
THE
EU
LEVEL
.
278
14.2.4
OPTIMISING
ESG
RISK
MANAGEMENT
.
280
14.3
MANAGING
CONDUCT
RISK
.
281
14.3.1
THE
CONDUCT
RISK
HOUSE
.
281
14.3.2
BUILDING
A
CONDUCT
RISK
FRAMEWORK
.
282
15
SUCCESSFUL
ESG
TRANSITION:
IMPLICATIONS
AND
CHALLENGES
FOR
EFFECTIVE
RISK
MANAGEMENT
.
285
ANITA
VARSHNEY,
JANNIK
LEIENDECKER,
AYTECH
PSEUNOKOV
15.1
INTRODUCTION
.
285
15.2
REGULATORY
FRAMEWORKS
IN
SELECTED
KEY
JURISDICTIONS
.
287
15.2.1
GENERAL
OVERVIEW
.
287
15.2.2
EUROPEANUNION
.
288
15.2.2.1
NON-FINANCIAL
REPORTING
DIRECTIVE
&
CORPORATE
SUSTAINABILITY
REPORTING
DIRECTIVE
.
289
15.2.2.2
SUSTAINABLE
FINANCE
TAXONOMY
.
290
XVIII
TABLE
OF
CONTENTS
15.2.2.3
EU
DISCLOSURE
REGULATION
.
293
15.2.2.4
EU
PRUDENTIAL
REGULATIONS
.
293
15.2.3
UNITED
STATES
.
295
15.2.4
HONG
KONG
.
298
15.2.5
SINGAPORE
.
299
15.3
SUSTAINABLE
FINANCE:
UPCOMING
CHALLENGES
FOR
COMPANIES
.
300
15.4
TARGET
PICTURE:
EFFECTIVE
MANAGEMENT
OF
ESG
RISK
.
303
15.4.1
ESG
STRATEGY
.
303
15.4.2
GOVERNANCE
AND
ORGANISATION
.
305
15.4.3
ESG
RISK
STEERING
.
307
15.4.4
IDENTIFICATION
OF
ENABLING
FACTORS
.
310
15.4.5
ESG
AS
AN
OPPORTUNITY
.
311
15.5
CONCLUSION
.
312
BIBLIOGRAPHY
.
315
XIX |
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| any_adam_object_boolean | 1 |
| author2 | Gittfried, Norbert Lienke, Georg Seiferlein, Florian Leiendecker, Jannik Gehra, Bernhard |
| author2_role | edt edt edt edt edt |
| author2_variant | n g ng g l gl f s fs j l jl b g bg |
| author_GND | (DE-588)1218706295 (DE-588)1188243942 (DE-588)1262418763 (DE-588)1262419077 (DE-588)130583162 |
| author_facet | Gittfried, Norbert Lienke, Georg Seiferlein, Florian Leiendecker, Jannik Gehra, Bernhard |
| building | Verbundindex |
| bvnumber | BV047489848 |
| classification_rvk | QB 300 QK 320 QP 150 QP 300 |
| ctrlnum | (OCoLC)1277013689 (DE-599)DNB1218179333 |
| discipline | Wirtschaftswissenschaften |
| discipline_str_mv | Wirtschaftswissenschaften |
| edition | 1. Auflage |
| format | Book |
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| genre_facet | Aufsatzsammlung |
| id | DE-604.BV047489848 |
| illustrated | Illustrated |
| index_date | 2024-07-03T18:15:08Z |
| indexdate | 2024-07-10T09:13:32Z |
| institution | BVB |
| institution_GND | (DE-588)106429586X |
| isbn | 9783956471889 3956471881 |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-032891163 |
| oclc_num | 1277013689 |
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| physical | XXVI, 348 Seiten Illustrationen, Diagramme 24 cm x 17 cm |
| publishDate | 2022 |
| publishDateSearch | 2022 |
| publishDateSort | 2022 |
| publisher | Frankfurt School Verlag |
| record_format | marc |
| spelling | Non-financial risk management in the financial industry a target operating model for compliance and ESG Risks N. Gittfried, G. Lienke, F. Seiferlein, J. Leiendecker, B. Gehra (eds.) 1. Auflage Frankfurt a.M. Frankfurt School Verlag 2022 XXVI, 348 Seiten Illustrationen, Diagramme 24 cm x 17 cm txt rdacontent n rdamedia nc rdacarrier Risikomanagement (DE-588)4121590-4 gnd rswk-swf Nachhaltigkeit (DE-588)4326464-5 gnd rswk-swf Corporate Governance (DE-588)4419850-4 gnd rswk-swf Umweltbezogenes Management (DE-588)4201709-9 gnd rswk-swf Corporate Social Responsibility (DE-588)7697760-2 gnd rswk-swf Finanzdienstleistungsinstitut (DE-588)4535644-0 gnd rswk-swf Compliance-System (DE-588)4442497-8 gnd rswk-swf Risikomanagement Finanzbranche Nachhaltigkeit Finanzdienstleistung Finanzindustrie Bank (DE-588)4143413-4 Aufsatzsammlung gnd-content Finanzdienstleistungsinstitut (DE-588)4535644-0 s Umweltbezogenes Management (DE-588)4201709-9 s Corporate Social Responsibility (DE-588)7697760-2 s Corporate Governance (DE-588)4419850-4 s Nachhaltigkeit (DE-588)4326464-5 s Compliance-System (DE-588)4442497-8 s Risikomanagement (DE-588)4121590-4 s DE-604 Gittfried, Norbert (DE-588)1218706295 edt Lienke, Georg (DE-588)1188243942 edt Seiferlein, Florian (DE-588)1262418763 edt Leiendecker, Jannik (DE-588)1262419077 edt Gehra, Bernhard (DE-588)130583162 edt Frankfurt School Verlag GmbH (DE-588)106429586X pbl Erscheint auch als Online-Ausgabe, PDF 978-3-95647-190-2 Erscheint auch als Online-Ausgabe, EPUB 978-3-95647-189-6 Erscheint auch als Online-Ausgabe, MOBI 978-3-95647-191-9 DNB Datenaustausch application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=032891163&sequence=000001&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Non-financial risk management in the financial industry a target operating model for compliance and ESG Risks Risikomanagement (DE-588)4121590-4 gnd Nachhaltigkeit (DE-588)4326464-5 gnd Corporate Governance (DE-588)4419850-4 gnd Umweltbezogenes Management (DE-588)4201709-9 gnd Corporate Social Responsibility (DE-588)7697760-2 gnd Finanzdienstleistungsinstitut (DE-588)4535644-0 gnd Compliance-System (DE-588)4442497-8 gnd |
| subject_GND | (DE-588)4121590-4 (DE-588)4326464-5 (DE-588)4419850-4 (DE-588)4201709-9 (DE-588)7697760-2 (DE-588)4535644-0 (DE-588)4442497-8 (DE-588)4143413-4 |
| title | Non-financial risk management in the financial industry a target operating model for compliance and ESG Risks |
| title_auth | Non-financial risk management in the financial industry a target operating model for compliance and ESG Risks |
| title_exact_search | Non-financial risk management in the financial industry a target operating model for compliance and ESG Risks |
| title_exact_search_txtP | Non-financial risk management in the financial industry a target operating model for compliance and ESG Risks |
| title_full | Non-financial risk management in the financial industry a target operating model for compliance and ESG Risks N. Gittfried, G. Lienke, F. Seiferlein, J. Leiendecker, B. Gehra (eds.) |
| title_fullStr | Non-financial risk management in the financial industry a target operating model for compliance and ESG Risks N. Gittfried, G. Lienke, F. Seiferlein, J. Leiendecker, B. Gehra (eds.) |
| title_full_unstemmed | Non-financial risk management in the financial industry a target operating model for compliance and ESG Risks N. Gittfried, G. Lienke, F. Seiferlein, J. Leiendecker, B. Gehra (eds.) |
| title_short | Non-financial risk management in the financial industry |
| title_sort | non financial risk management in the financial industry a target operating model for compliance and esg risks |
| title_sub | a target operating model for compliance and ESG Risks |
| topic | Risikomanagement (DE-588)4121590-4 gnd Nachhaltigkeit (DE-588)4326464-5 gnd Corporate Governance (DE-588)4419850-4 gnd Umweltbezogenes Management (DE-588)4201709-9 gnd Corporate Social Responsibility (DE-588)7697760-2 gnd Finanzdienstleistungsinstitut (DE-588)4535644-0 gnd Compliance-System (DE-588)4442497-8 gnd |
| topic_facet | Risikomanagement Nachhaltigkeit Corporate Governance Umweltbezogenes Management Corporate Social Responsibility Finanzdienstleistungsinstitut Compliance-System Aufsatzsammlung |
| url | http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=032891163&sequence=000001&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA |
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