Building Fundamental Capability: What You Should Be Able To Do

To become a proficient operational risk manager, you need to build fundamental capabilities (BFC) by deliberately practicing "What You Should Be Able to Do" after each lesson. This involves practicing, testing the results of your practice against some benchmark, receiving feedback, then re-practice after incorporating the feedback and repeating as necessary, until the desired level of proficiency is achieved.

Avoiding the Ilusion of Proficiency

Research shows that the more people merely watch others perform (without actually practicing it themselves i.e. listening to a lecture, or reading ), the more they believe they can perform what they watched others do. However, test after test shows that people's actual ability to perform what they observed others do does not improve. All that improves is their ability to describe the task accurately but not their ability to perform the task proficiently. For example, you may know all the rules of chess by studying the rules or observing others play chess but you will never be an expert chess player unless you deliberately practice playing chess. The same is true for doing risk management.

To avoid the illusion of proficiency, you must practice, identify gaps in your practice against the desired level of proficiency by either self or coached feedback, practice correcting the gaps, and repeat until there are no remaining gaps within your desired level of proficiency. This is what is meant by deliberate practice.

Becoming Proficient

In this course, there will be ample opportunity for you to deliberately practice both in class and offline. It will be up to you to seize the opportunity.

In class, case studies and working through risk issues will give you time to practice. Offline, the opportunity to practice is provided through practice exercises after each class, as described below.

These exercises are more than just key takeaways.  Key takeaways are summaries of what you should know while BFC are practice sessions designed to improve your proficiency in doing rather than just knowing. It is about improving know -how not know about.

BFC provides a self-assessment after each class to identify areas (the gaps) where you need further practice and feedback to improve your proficiency.  To get the full benefit of completing BFC, you should actually practice doing the exercise with a colleague and get their feedback or ask questions in the comment section below. If you just read them and convince yourself that you can do it, you will fall into the illusion of proficiency and the illusion will be shattered once you are asked to perform the task either on an exam or more importantly at work.

To paraphrase Feynman, one of the greatest 20th-century theoretical physicists, the best way to know if you really understand something is by showing to someone else how it is done. This technique has become popular beyond physics and is now known as the Feynman technique. 

By practicing BFC with a colleague or in groups, you will identify

• what you really can do vs. what you think you can do and

• guide you to seek feedback on those you can't yet do

• you can seek feedback by asking in-class questions or by positing as "comments" in the related post.

  
  

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BFC: What You Should be Able To Do (organized by Class)

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Class 1

• Create a MECE structure

  • gather lots of information about something you find interesting and organize the information into a MECE structure

• Use Agile Problem Solving when appropriate

  • take any interesting problem you would like to solve

  • where you don't know where to start and solve it using the Agile Problem Solving methodology

• Create an Elevator Pitch

  • Find a question you may be asked, like "What is the operational risk course about" or "What are you working on?" or any other question

  • Create an answer

    • Organize the answer into a MECE structure, this may involve adding parts or deleting parts of the answer

  • Create an EP from the MECE, using the EP methodology ( example of an EP: "I am creating y, for x, by using z." or some variation of this structure, and where x, y, and z are the first level of your MECE structured answer.)

• Create and Communicate the RMF

  • Create the RMF as a MECE and Communicate through an Elevator Pitch.

    
    

Class 2

• Create a gap analysis

  • identify gaps

  • create corrective action plans to close the gap

• Use the Basel Operational Risk Type

  • create rules for removing ambiguity arising from Basel op rik types not being MECE

• Create and OPR

  • analyze and draw insights

  • create a MECE structure for the analysis and insights

  • write an EP to summarize the analysis and insights

Class 3

• Create a current ORP with

  • Internal Data

  • External Data

  • Changes in Business Internal and External Environment

  • Scenario Analysis

  • Identify both benefits, issues, and ways to deal with including Internal Data, External Data, Changes in Business Internal and External Environment, and

    Scenario Analysis in Building the current ORP

• Analyze the ORP 

  • use the RLOB ORP to develop a first cut for Identifying op risks associated with any new initiative

  • summarize the analysis through an EP

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Class 4

• Create and RCSA, including

  • identify the inherent risks and rate them

  • identify the associated appropriate controls and rate them

  • rate the residual risk

  • develop corrective action plans where the residual risk is outside the RA

  • Summarize the results of the RCSA in an EP

Class 5

• Create and assess the Governance structure for managing (op) risk, including

  • Major risk policies' effectiveness

  • clarity of roles and responsibilities for First Line, Second Line, and Third Line

  • committee mandates

  • assess the strength of risk culture

  • meeting regulatory expectations.

  • build a MECE structure as an intermediate step

  • Summarize the results of the assessment in an EP

Class 6

• Create and assess the Operational Resilience capability for managing (op) risk, including

  • critical activities

  • recovery Time and Point (Level) Objectives

  • establish roles and responsibilities for First Line, Second Line, and Third Line

  • committee mandates

  • Business Continuity Plan

  • meeting regulatory expectations.

  • build a MECE structure as an intermediate step

  • Summarize the results of the assessment in an EP

Class 7

• Create and assess the Financial Resilience capability for managing (op) risk, including

  • Evaluate strengths and weaknesses of alternative methods

  • Summarize the what and how Financial Resilience achieves in an EP

Class 8

• Apply ECRG to Cybersecurity

• Summarize the what and how of Cybersecurity Risk Management in an EP

Class 9

• Apply ECRG to Model Risk Management

• Summarize the what and how of Model Risk Management in an EP