Banking Operations

Operations in Banking & Financial Services

The

Changing Banking Paradigm

External drivers compel banks to leverage t he developments in Information Technology and continuously innovate

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Regulatory change and consolidation

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Competitive forces

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Changing Consumer Preference

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Technological developments

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Basel II

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IAS

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Operational Operational Risk Ris k Operational

risk can arise from failure to comply with policies, laws and regulations, from fraud or forgery, or from a breakdown in the availability or integrity of services, systems or information.

» Event risk (Year 2000, Euro, Basel 2, IAS) » Payments/settlement risk » Technology/systems exposure » Fraud/compliance risk » Natural disaster  » Change management

Sources of Operational Operational Risk

Differences between Three

Lines of Business

Risk In Banking Sector 

Equity Risk Market Risk

Interest Rate Risk

Trading Risk Gap Risk

Currency Risk Commodity Risk

Financial Risks

Transaction Risk

Counterparty Risk

Portfolio Concentration Risk

Issuer Risk

Credit Risk Liquidity Risk Operational

Risk

Regulatory Risk Human Factor  Risk

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Underst nderstand andin ing g

Market Market Risk

It is the risk that the value of tangible and intangible of a financial institution will be adversely affected by movements in market rates or prices such as 

Interest rates,

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Equity prices,

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Foreign exchange rates

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Credit spreads

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Commodity prices Resulting in a loss to earnings and capital.

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Waste

In Banking

»Waste No.1: No.1: Over-Processing: Adding more value to a service or product than customers want or will pay for  »Waste No. 2: 2: Transportation: Unnecessary movement of  materials, products or information »Waste No. 3: 3: Motion: Needless movement of people »Waste No. 4: 4: Inventory: Any work-in-process that is in excess of what is required to produce for the customer 

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Waste

In Banking«

»Waste No. 5: 5: Waiting: Any delay between when one process step/activity ends and the next step/activity begins »Waste No. 6: 6: Defects: Any aspect of the service that does not conform to customer needs »Waste No. 7: 7: Overproduction: Production of service outputs or products beyond what is needed for immediate use

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Example«Pain Areas

» The account opening process had many inter-linked & sequential processes. » One of the most critical ones was the ³Dispatch of PIN´ to use the ATM services. » Many customers did not receive the PIN at all resulting in customer complaints, hence belying their expectation of a hassle-free banking. » Losing Customer Base

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