Ensuring adherence to Operational Risk management policies and procedures; Monitoring the implementation and execution of Operational Risk strategies from an independent viewpoint, and advising the Board Audit Committee and Audit Committee accordingly; Independently and pragmatically advising management on the necessary regular review processes within the Operational Risk environment, and of how and where implementation and ongoing Operational Risk management can be improved; and Independently validating the integrity and administration of Operational Risk models for use within regulatory or internal capital ratio or capital allocation policies. Operational Risk Overview Operational risk is the risk of financial loss resulting from inadequate or failed internal processes, people and systems or from external events. Operational Risk consists of the following risk event categories: Process Risk The process in undertaking any transactions entails a chain that includes, transaction risk, documentation/contract risk, and control risk. People Risk The differing background, education, skills, personal expectations/ ambitions, ethical standards are unique to each individual. Lack of understanding, skill gaps and above all inadequate training may lead to people risk. Systems Risk Takaful companies use various systems to support their operations. Failure or inadequate functioning of systems can result in risks related to ineffective operations, inadequate decision making, control weaknesses...etc. Event Risk Certain uncontrollable events may lead to Operational Risk such as natural disasters or terrorist attacks. Examples of Operational Risks in each category are detailed below: Risk source Example of risk Processes External data – clients External data – industry Internal management information and decisions Methodology, modeling and
Ensuring adherence to Operational Risk management policies and procedures; Monitoring the implementation and execution of Operational Risk strategies from an independent viewpoint, and advising the Board Audit Committee and Audit Committee accordingly; Independently and pragmatically advising management on the necessary regular review processes within the Operational Risk environment, and of how and where implementation and ongoing Operational Risk management can be improved; and Independently validating the integrity and administration of Operational Risk models for use within regulatory or internal capital ratio or capital allocation policies. Operational Risk Overview Operational risk is the risk of financial loss resulting from inadequate or failed internal processes, people and systems or from external events. Operational Risk consists of the following risk event categories: Process Risk The process in undertaking any transactions entails a chain that includes, transaction risk, documentation/contract risk, and control risk. People Risk The differing background, education, skills, personal expectations/ ambitions, ethical standards are unique to each individual. Lack of understanding, skill gaps and above all inadequate training may lead to people risk. Systems Risk Takaful companies use various systems to support their operations. Failure or inadequate functioning of systems can result in risks related to ineffective operations, inadequate decision making, control weaknesses...etc. Event Risk Certain uncontrollable events may lead to Operational Risk such as natural disasters or terrorist attacks. Examples of Operational Risks in each category are detailed below: Risk source Example of risk Processes External data – clients External data – industry Internal management information and decisions Methodology, modeling and
21)%2090%20pgs%20Principles%20of%20Risk%20Management%20for%20Takaful%20Policies%20&%20Procedures.docx