Implementation of an operational risk management system at the level of the management company and at the level of investment funds

Abstract

The purpose of this thesis is to explain precisely the implementation of an operational risk management framework in the context of Pure Capital SA, a mid-sized management company active in the wealth management, investments funds and Manco services. To this regard, the report contains partly a theoretical and academic approach on operational risk management in the financial industry. From the regulatory approach of minimum operational risk capital induced by Basel Agreements to the practical methods including RCSA or scenario analysis for the assessment of operational risks, the dissertation covers the best practices regarding the subject in the financial industry. Moreover, a detailed analysis containing the different steps of the implementation of the project is provided. The project led to the production of a matrix that takes into account the main functions of any operational risk management system: identification, assessment, control, monitoring and reporting of operational risks. In order to achieve this task, I used RCSA scoring methods and scenarios analyses during risk-based interviews for each department. The results of this internal analysis are reported in operational risk factsheets for every department. In addition to the matrix, the mission resulted in the development of an operational risk database where operational incidents including operational losses, near miss events and unintentional gains are reported. A detailed internal procedure has been established for the reporting of an operational incident. Finally, this thesis contains a reflective analysis on a key aspect of operational risk management highlighted by the COVID-19 crisis during which this project was carried out: Business Continuity Management. Thanks to the implementation of these tools, Pure Capital can demonstrate to its regulatory supervisor and its stakeholders appropriate operational risk management among its activities.