Beyond The E-Myth
Michael Gerber's 1988 book, The E-Myth, is recommended reading for all entrepreneurial business owners. If you've not read it or need a review, here is my brief summationThe E-Myth: A SummaryGerber introduces the concept that a business owner wears three hats: The technician, the manager and the entrepreneur. The typical entrepreneur goes into business to pursue their passion doing something he or she is technically competent and comfortable doing. Gerber exposes the entrepreneurial myth that successful growth in an entrepreneurial venture is not so much about the joy of performing the technical tasks that the own

Throwing Good Money After Bad Design-Is Your Small Business Wasting Money on the Wrong Graphic Artis
A lot of my friends are graphic artists, they're great people and honestly, there are a couple of them that are pretty darn good at creating art. But you're about to learn that art, unless you sell art, won't help you attract more customers and grow your business. After reading this article my artist friends are probably going to like me a lot less. That's because this article uncovers some striking truths of small business owners throwing large sums of money away by hiring graphic artists that aren't business savvy or experienced in marketing. I feel it's important to share this with you, the small busine

How to Know if You Are in the Right Career
Ever wonder if you are in the right career? If you are like most people you have. Did you know that 80% of people are currently misemployed? They are either underemployed, not happy with their current position or not fairly compensated for their skill and/or function set. If so many people are misemployed, why do they stay in their current situation? Why do they not take the necessary steps to move into something that will be fulfilling and something they can look forward to doing every day - a situation they can truly be proud of?The following are some of the most common reasons:• Complacency• Fear of the unknownlayers, for credit is the reason why banks exist. In the current mad scramble to meet the Basel II requirements, credit risks have been getting the lion’s share of attention while far less attention has been given to the operational risk issues. Basel II is more than just reserving capital against credit and operational risk. Now for the first time, banks have to take into account the operational risk aspects as well.

To start with, Basel II provides a range of options for determining the capital requirements of credit and operational risks. This allows banks and bank supervisors the opportunity to select the most appropriate option for their operations and their financial market infrastructure. Additionally, allowance is made for a limited degree of national discretion in the way in which each of these options may be applied.

Based on the Basel II requirements, I summarize briefly what needs to be done to effectively implement the operational risk aspects of this important international standard.

The starting point is the board of the bank and the creation of an appropriate “Risk Management Policy”. It should be remembered that bank boards generally do not have members with operations experience. Very often board members are drawn from business areas within the bank whose primary concern is revenue generation. Operational risk controls cost money and generally reduce profits – which means that they are not really a popular boardroom subject. Bank boards need to be educated and coaxed into the role they have to play in the mitigation of Operational Risk.

To effectively implement operational risk controls it is first necessary to identify the risks and then to establish appropriate written board policies and procedures to reduce these. These policies are the foundation for the development of risk control measures and need to be established for the whole range of operational issues including products, processing, IT & security and business continuity.

Risk mitigation can only be effective if a centralized risk management unit controls the whole risk reduction process. Most banks internal risk functions are fragmented and split over numerous areas (such as IT security, internal audit, physical security etc.) that tends to render a common risk policy ineffective. A critical element in the whole approach to operational risk control is the centralization of this function at

select the most appropriate option for their operations and their financial market infrastructure. Additionally, allowance is made for a limited degree of national discretion in the way in which each of these options may be applied.

Based on the Basel II requirements, I summarize briefly what needs to be done to effectively implement the operational risk aspects of this important international standard.

The starting point is the board of the bank and the creation of an appropriate “Risk Management Policy”. It should be remembered that bank boards generally do not have members with operations experience. Very often board members are drawn from business areas within the bank whose primary concern is revenue generation. Operational risk controls cost money and generally reduce profits – which means that they are not really a popular boardroom subject. Bank boards need to be educated and coaxed into the role they have to play in the mitigation of Operational Risk.

To effectively implement operational risk controls it is first necessary to identify the risks and then to establish appropriate written board policies and procedures to reduce these. These policies are the foundation for the development of risk control measures and need to be established for the whole range of operational issues including products, processing, IT & security and business continuity.

Risk mitigation can only be effective if a centralized risk management unit controls the whole risk reduction process. Most banks internal risk functions are fragmented and split over numerous areas (such as IT security, internal audit, physical security etc.) that tends to render a common risk policy ineffective. A critical element in the whole approach to operational risk control is the centralization of this function at

s experience. Very often board members are drawn from business areas within the bank whose primary concern is revenue generation. Operational risk controls cost money and generally reduce profits – which means that they are not really a popular boardroom subject. Bank boards need to be educated and coaxed into the role they have to play in the mitigation of Operational Risk.

To effectively implement operational risk controls it is first necessary to identify the risks and then to establish appropriate written board policies and procedures to reduce these. These policies are the foundation for the development of risk control measures and need to be established for the whole range of operational issues including products, processing, IT & security and business continuity.

Risk mitigation can only be effective if a centralized risk management unit controls the whole risk reduction process. Most banks internal risk functions are fragmented and split over numerous areas (such as IT security, internal audit, physical security etc.) that tends to render a common risk policy ineffective. A critical element in the whole approach to operational risk control is the centralization of this function at

development of risk control measures and need to be established for the whole range of operational issues including products, processing, IT & security and business continuity.

Risk mitigation can only be effective if a centralized risk management unit controls the whole risk reduction process. Most banks internal risk functions are fragmented and split over numerous areas (such as IT security, internal audit, physical security etc.) that tends to render a common risk policy ineffective. A critical element in the whole approach to operational risk control is the centralization of this function at a director level within the bank.

Once the appropriate policies are in place the next step is to undertake a risk assessment. Risk assessment is the process that identifies and evaluates the internal and external factors that could adversely affect the achievement of a banking organization’s operational, information and compliance objectives. In the full sense of the word this should cover all the risks such as credit, market, liquidity and operational risk. For our purposes we limit our focus on operational risk alone. Under Basel II operational risk is defined as “… the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events”. This definition includes legal risk, but excludes strategic and reputational risk.

Basel II is specific on the actions that need to be taken in operational risk management. These actions are based on international risk containment standards, most of which have been developed through the Bank for International Settlements. There is a strong emphasis on detailed definitions and documentation relating to the use of the methods, the development of policies and their implementation. There is less focus on technology and more on doing.

Once the Risk Assessment has been completed the previously defined risk reduction policies need to be implemented.

Implementing Basel II is not a once off operation. It is an ongoing process aimed at limiting a bank’s exposure to risks. In the operational area reducing and containing operational risks so as to control the amount of capital that will have to be reserved. This ongoing process can only be achieved through the following steps;

•Fine-tune Operational Risk controls – New products, process and techniques will need to be brought under appropriate controls. Existing controls will need to be reviewed and changed where necessary.

•Feedback on Policy – Experience will indicate whether the Operational Risk policy is both effective and appropriate. This may result in the need to refine the Policy and the Controls over time.