• University of Exeter Business School
• Module

Managing Operational Risk in Financial Institutions

Module description

This module is intended for Financial Services Professional Degree Apprenticeship students who would like a background to the operational risk management framework in financial institutions. The module provides an understanding on the general business models and associated risks of the key types of financial services institutions: insurance, retail banking, investment banking, investment management and stockbroking/wealth management. The module presents an analysis on how the relationship between governance infrastructure, operational risk policy, risk management process and the operational risk framework influence the firm’s risk culture.

Module aims - intentions of the module

This module aims to provide students with an analysis of the principles, application and scope of the policy framework for managing operational risk. Student will critically analyse the fundamental concepts of a financial institution’s balance sheet and evaluate the characteristics of specified risks as they apply to a simple balance sheet.

This module shows how the use of operational controls can reduce the impact or likelihood of operational risk in a financial institution. Student should be able to address the inherent risks in its business activities and recognise the importance of appropriate governance to financial services institutions.

The overall aim is to understand the key aims of operation risk management, which include the effective identification, measurement, assessment and management of operations risk, and the reduction or mitigation of the potential impact should the risk occur. Students should be able to evaluate plans for potential risk events that impact the business and practical constraints of implementing an operational risk management framework.

Intended Learning Outcomes (ILOs)

ILO: Module-specific skills

On successfully completing the module you will be able to...

• 1. Critically analyse the fundamental concepts of a financial institution’s balance sheet
• 2. Analyse the risks associated with off-balance sheet activity in financial services institutions
• 3. Explain the importance of appropriate governance to financial services institutions
• 4. Understand the effect of organisational culture on operational risk management
• 5. Appraise the practical constraints of implementing an operational risk management framework
• 6. Understand the regulatory compliance, risk governance and policy for managing operational risk
• 7. Analyse the principles, application and limitations of organisational culture and structure on operational risk management
• 8. Analyse the role of the business in the detection, prioritisation, escalation and prevention of operational risk

ILO: Discipline-specific skills

On successfully completing the module you will be able to...

• 9. Apply methods of risk assessment to practical examples and evaluate plans for potential risk events that may impact the business
• 10. Assess how to mitigate or transfer operational risk, including business continuity and contingency planning
• 11. Appraise the operational risk issues linked with recent major risk related events in the financial services industry

ILO: Personal and key skills

On successfully completing the module you will be able to...

• 12. Understand the importance of risk escalation and reporting to incident management
• 13. Critically analyse the importance of communication with support and control functions to foster an operational risk aware culture

Syllabus plan

• Fundamentals of Business Models and Associated Business Risk in Financial Institutions
• Fundamentals of Financial Risk in Financial Institutions
• Operational Risk in Financial Institutions
• Organisational Considerations in Operational Risk Management
• Management of Operational Risk in Financial Institutions
• Application of the Risk Management Process
• Operational Risk Incidents: An Investigation
• Regulation of Operational Risk
• Supporting Operational Risk Management in the Workplace

Learning activities and teaching methods (given in hours of study time)

Details of learning activities and teaching methods

Formative assessment

Summative assessment (% of credit)

Details of summative assessment

Details of re-assessment (where required by referral or deferral)

Re-assessment notes

Defer – as first time

Refer – capped at 40%

Indicative learning resources - Basic reading

Basic reading:

• Managing Operational Risk in Financial Institutions Workbook Ed4, the Chartered Institute for Securities and Investment.

Key words search

Operational Risk management