PRMIA/ISDAOperational Risk in E Trading London Wednesday 10th April 2002 G D Woods Managing Director +44 207 678 3633 David.Woods@abnamro.com
E Risks • Aren’t really new • Market & Credit Risk work differently in an e-environment • Operational Risk more discussed Property of ABN AMRO Bank N.V.
Seven Types of Risk • Inside the Organisation- People- Processes- Technology- Strategy • Outside the Organisation- Business Environment- Legal Systems- Bad Guys (Attribution - Dr Nigel Upton, LBS) Property of ABN AMRO Bank N.V.
Risks that Change • FX Risk • IR Risk • Liquidity Risk • Reputation Risk • Customer Acquisition Risk • Speed Property of ABN AMRO Bank N.V.
A Checklist of e-Business Risk Issues Risk Source Check Risk Issues (Attribution - Dr Nigel Upton, LBS) Property of ABN AMRO Bank N.V.
What we’re trying to achieve • Lower error rates • Lower costs • Acceptable Risk/return Property of ABN AMRO Bank N.V.
And the Potholes... • Mistakes are more costly • Higher 3rd party risks • Risk clustering • Resource availability • Product scalability Property of ABN AMRO Bank N.V.
Management • Must understand Risks & effect on Business process • Decide on Risks • Accept Risks • Instil culture of Risk awareness Property of ABN AMRO Bank N.V.