Page 95 - Risk Management in current scenario

in terms of likelihood and impact which could be any or all of the three
areas.

Based on the cause of the risk, appropriate controls are placed so that
the residual risks are not outside the risk appetite defined by the
Company.

In the management of operational risk, risk control plays a key role. It is
therefore very important to map correctly various causes of the risks, so
that appropriate controls may be placed.

The residual risk is again assessed in a form of likelihood and impact,
however, this time because of the controls applied; likelihood or impact
or both should be lower than inherent corresponding components.

The controls placed to reduce the residual risk, which may be preventive
or detective in nature. As seen above, if the controls are placed before
occurring event, it's a preventative control as it helps in reducing the
impact of risk. However, if the controls placed are post event, they are
detective in nature, which cannot reduce the impact of event.

In the operational risk,the way causes are driver of event similarly
controlsare most important treatment action to reduce the both
likelihood and impact. There is a possibility that the controls are excessive,
inappropriate or missing controls referred as lack of design effectiveness.
While on the other hand when controls are poorly executed they lack
operating effectiveness.

Summary
The area of operational risk is vast, this section has covered the
fundamental building blocks of the operational risk. In the absence of
available data for loss distribution modeling to quantify the operational
risk, RCSA serve as risk by risk assessment within the different areas of
business to address the key non-financial risks.

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