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Report BFA - Bankia 2014 / Risk managementOperational risk

Bankia’s operational risk management aims to minimise possible losses arising from failures or shortcomings in processes, personnel or internal systems, or from external events. This definition includes legal risk, but excludes reputational risk, which is taken into account by qualitatively evaluating the impact on end customers of any identified operational risks.

Bankia’s operational risk management objectives are as follows:

  • Foster a culture focused on risk awareness, assuming responsibility and commitments, and service quality.
  • Ensure operational risks are identified and measured in order to prevent possible damages that could affect results.
  • Reduce losses from operational risks by applying systems to continuously improve processes, control structures and mitigation plans.
  • Encourage the use of risk transfer mechanisms that limit operational risk exposure.
  • Verify the existence of contingency and business continuity plans.

The institution has established a contingency plan setting out the necessary warning mechanisms.

Management efforts during 2014 were significantly shaped by the recommendations deriving from Internal Audit’s report on the 2013 Guide on Application of the Standardised Approach.

In 2014, internal assessment process was widened to include 55 Operational Risk Originator Centres (COROS), covering the entire institution and two of the most important group companies. This work resulted in a map of events across the whole institution. The Operational Risk Tool (ARO) was also updated on delivery of its second phase.

The first inventory was also taken of insurance policies taken out by Bankia’s various business units (excluding the policies covering obligations with retired employees). The aim of this task is to verify how effective the policies are at mitigating operational losses, although the plan is to change tack in coming years and take out policies that cover operational losses.

A special collaboration programme will be carried out in 2015 with the team responsible for managing retail branch network operations to mitigate the most significant loss events at branches. This programme will include prevention of events related with transaction documents (MiFID, EMIR) and due diligence. There will be a drive during the year to furnish branches with guidelines on the operational risks to which their day-to-day work is exposed.

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