Research On The Operational Risk Management System Of Securities Companies

Basle II Capital Accord expands the treatment of integrated risk management framework to include a specific operational risk component, other than market risk and credit risk component, in the capital requirements. More and more China securities companies have been bankrupted or taken over due to severe operational risk loss events since 90's late of the 20th century. These negative events call the attentions of securities industry and the regulator to operational risk, which should be an important internal control subject similar as market risk and credit risk. So operational risk management has became one of the key indexes of the securities competitive strength.In this paper there has three objectives. The first one is to establish a set of operational risk data analysis and data management system for securities companies. The second one is to construct a serial risk management process , which including risk identification, risk assessment and measurement, risk control mitigation and risk report. The last one objective is to provide a IT management solution for a effective risk management implementation. In order to achieve these objects, this paper discuss the operational risk in China securities companies employed the tools such as Basel II Accord, capital regulating theory, commercial banks'experience and the operational risk analysis conception.Moreover, the necessity to establish operational risk management system is illustrated in the aspects of securities company risk feature. With the objective of building operational risk management system, the second step of this paper present a complete op risk management framework by using three important tools (operational risk loss data collection, key risk indicator, self assessment). This paper also give a model about the roles conversion between risk controller and stakeholder, this model help to discuss the responsibilities of different roles. The analysis for implementation process has four main steps. 1. Base risk identified method. 2. Risk heat map quality measurement. 3. Standard and advanced econometric, risk control and risk mitigation mechanism. 4. Risk report.According to the above result, with reference to the existing risk management information system, I designed a securities-company-oriented operational risk management system (including the main structure, system function, data input/output, user interface), to support the daily operational risk management business. Finally, the feasibility of this paper are well proved by the system.