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BRICS in the Spotlight: Economic Powerhouse or Fractured Alliance?

BRICS, (Brazil, Russia, India, China, and South Africa), was established on June 16, 2009, with the primary objective of reducing member nations' dependence on the Western economy. Notably, BRICS collectively represents 25% of the world's total economic output, covers 26.7% of the world's surface area, comprises 41.5% of the global population, and boasts a combined GDP of $25 trillion. And now we know why people are fascinated by BRICS.Upon closer examination, it becomes evident that South Africa stands as the weakest member. Meanwhile, Brazil contends with an alarmingly high interest rate of 13.25%, and Russia remains embroiled in a protracted conflict that was initially expected to last no longer than two months but has now persisted for a year and a half, leading to a host of sanctions. In contrast, India appears to hold the most promising long-term potential within BRICS, and China's impressive, meritocratic GDP cannot be overlooked.However, skepticism lingers regarding BRICS' ability to fully meet global expectations, driven by factors extending beyond economic considerations. One pressing concern centers on the significant conflict between BRICS' heavyweight members, China and India, particularly in the heavily militarized Tibet region. Recent events, such as those in the Galwan Valley, have amplified these tensions (https://lnkd.in/epYzuYpM).Additionally, the recent inclusion of new members within BRICS, including KSA, UAE, Argentina, Egypt, Iran, and Ethiopia, raises questions. While KSA and UAE demonstrate economic strength, Argentina grapples with staggering hyperinflation at 113.40%. Egypt's economic performance, marked by high inflation and a soaring interest rate of 19.25%, is concerning, and its national currency has seen a significant depreciation from $0.10 in 2008 to just $0.032 in 2023. Meanwhile, Iran struggles under sanctions.Amidst these uncertainties, my skepticism regarding BRICS' prospects remains unwavering. I believe that the recent recruitment of new members has extinguished the last opportunity for BRICS to thrive. Photo Credits to visualcapitalist.com

by Badr Elhamzaoui | 9 months ago | 0 Comment(s) | 237 Share(s) | Tags : Finance Economics

The State of GRC in Moroccan Banks

Introduction:Governance, Risk, and Compliance (GRC) is a crucial aspect of the banking industry. In Morocco, the State Bank of Morocco was established in 1907 to stabilize the Moroccan currency and promote trade and development in the Sultanate. Following the independence of Morocco, it was replaced in 1959 by the newly created Bank Al-Maghrib, which is the central bank of Morocco. Bank Al-Maghrib's role includes banknotes and coins production, monetary policy tools, management of foreign exchange reserves, banks supervision, and ensuring the security of payment systems and means[3]. In this article, we will discuss the state of GRC in Moroccan banks and where Bank Al-Maghrib stands. We will also explore how RiskNucleus GRC Solution can help banks thrive in its management. The State of GRC in Moroccan Banks:Moroccan banks are subject to regulatory guidelines and industry standards set by Moroccan regulatory authorities such as the Moroccan Capital Market Authority (AMMC) and the Moroccan Financial Market Authority (CDVM) [2]. Additionally, Moroccan banks must adhere to international standards set by the Basel Committee on Banking Supervision, which sets global banking standards, including Basel III[1]. The International Monetary Fund (IMF) often publishes reports on the economic and financial conditions of various countries, including Morocco. These reports can offer a broader perspective on the state of Moroccan banks and their compliance with international standards[1]. Where Bank Al-Maghrib Stands:Bank Al-Maghrib plays a crucial role in ensuring GRC in Moroccan banks. As the central bank of Morocco, it is responsible for banks supervision and ensuring the security of payment systems and means[3]. Bank Al-Maghrib's role in GRC is essential in our daily lives, and it is the "bank of banks," where all commercial banks have accounts, which they are obliged to credit[3]. Bank Al-Maghrib's network is composed of two branches, Rabat and Casablanca, and 20 agencies throughout Morocco[3]. How RiskNucleus GRC Solution Can Help Banks Thrive in Its Management:RiskNucleus GRC Solution is a GRC management tool that can help Moroccan banks thrive in its management. The tool provides transparency, efficiency, and accountability, which are the three benefits of implementing a GRC management tool[4]. RiskNucleus GRC Solution can easily integrate with an existing technology stack while remaining user-friendly. The tool eliminates the worry of managing regulatory requirements and provides actionable insights to improve the GRC approach, aligning key risk initiatives such as cybersecurity processes[4]. By using RiskNucleus GRC Solution, Moroccan banks can streamline their GRC processes, reduce costs, and improve their overall compliance posture. Conclusion:In conclusion, GRC is a crucial aspect of the banking industry in Morocco. Moroccan banks must adhere to regulatory guidelines and industry standards set by Moroccan regulatory authorities and international standards set by the Basel Committee on Banking Supervision. Bank Al-Maghrib plays a crucial role in ensuring GRC in Moroccan banks. RiskNucleus GRC Solution is a GRC management tool that can help Moroccan banks thrive in its management. By using RiskNucleus GRC Solution, Moroccan banks can streamline their GRC processes, reduce costs, and improve their overall compliance posture. Citations:[1] https://ppl-ai-file-upload.s3.amazonaws.com/web/direct-files/707422/529cfcc7-1135-4551-b574-903cf011c27b/Brochure Bundled offers M3T Consulting & FLC.pptx[2] https://en.wikipedia.org/wiki/State_Bank_of_Morocco[3] https://www.bkam.ma/pedagogic/What-bank-al-maghrib-does/What-is-the-role-of-bank-al-maghrib[4] https://www.onetrust.com/blog/what-are-the-benefits-of-a-grc-management-tool/[5] https://www.bkam.ma[6] https://en.wikipedia.org/wiki/Bank_Al-Maghrib[7] https://www.bkam.ma/museum/Corporate-area/The-missions-of-the-central-bank[8] https://www.linkedin.com/advice/3/what-key-features-benefits-using-grc-tool-enterprise-risk-assessment[9] https://www.bkam.ma/en[10] https://www.privacyshield.gov/ps/article?id=Morocco-U-S-Banks-and-Local-Correspondent-Banks[11] https://www.bkam.ma/pedagogic/Kid-s-corner/What-is-the-role-of-bank-al-maghrib[12] https://hyperproof.io/resource/grc-platforms-5-features-you-need/[13] https://www.bkam.ma/en/content/view/full/4550[14] https://www.fitchratings.com/research/banks/moroccan-banks-resilience-in-uncertain-operating-environment-19-07-2022[15] https://www.britannica.com/topic/Bank-Al-Maghrib[16] https://uk.indeed.com/career-advice/career-development/what-is-grc-software[17] https://www.bkam.ma/en/Systems-and-means-of-payment/Financial-markets-infrastructure-and-monitoring/Overview[18] https://www.fitchratings.com/research/banks/major-moroccan-banks-peer-review-19-07-2022[19] https://www.ngfs.net/sites/default/files/medias/documents/ngfs_in-conversation-with-bam-hiba-zahoui.pdf[20] https://pathlock.com/governance-risk-and-compliance-grc-a-complete-guide/[21] https://www.bkam.ma/en/Monetary-policy/Strategic-framework/Presentation[22] https://www.trade.gov/country-commercial-guides/morocco-trade-financing[23] https://www.resolver.com/blog/agile-grc-solutions/[24] https://www.thebanker.com/Morocco-s-banking-sector-holds-steady-1624542662[25] https://www.logicgate.com/blog/grc-allows-you-to-play-offense-the-benefits-of-an-effective-grc-program/

by Youness El Kandoussi | 9 months ago | 0 Comment(s) | 181 Share(s) | Tags : Finance Risk

L’état de la gestion du risque opérationnel dans les banques marocaines

La gestion du risque op rationnel dans les banques marocaines : vers une standardisation des approches de gestion Le risque op rationnel est d fini par le Comit de Bâle comme « le risque de pertes r sultant de processus internes inad quats ou d faillants, de personnes et systèmes, ou d’ v nements externes» https://www.ir-bankofafrica.ma/sites/default/files/2020-08/Organisation%20de%20la%20gestion%20des%20risques%20-%202019.pdf. Il englobe ainsi les risques li s à la fraude, aux erreurs humaines, aux d faillances techniques, aux catastrophes naturelles, aux changements r glementaires, etc. Le risque op rationnel est consid r comme l'un des principaux risques auxquels sont expos es les banques, et sa gestion est devenue un enjeu strat gique pour la stabilit financière et la rentabilit des tablissements bancaires. Au Maroc, le secteur bancaire a connu ces dernières ann es une volution importante, marqu e par la diversification des activit s, l'innovation technologique, l'internationalisation et la concurrence accrue. Ces facteurs ont augment la complexit et la vuln rabilit des banques face au risque op rationnel. Ainsi, les banques marocaines ont dû renforcer leur dispositif de gestion des risques op rationnels, en se conformant aux normes internationales et aux exigences du r gulateur national, Bank Al-Maghrib. Selon une tude men e par Chemlal et al. (2020) http://revue-rimms.org/wp-content/uploads/2020/06/ARTICLE-7-ASMAE-MRABET-2.pdf, les banques marocaines cot es en bourse ont adopt une approche globale et int gr e de la gestion des risques op rationnels, bas e sur les tapes suivantes : L'identification des risques op rationnels à travers l'analyse des processus m tiers, des incidents pass s et des sc narios potentiels. L' valuation des risques op rationnels à l'aide d'indicateurs quantitatifs (pertes effectives, pertes attendues, capital conomique) et qualitatifs (cartographie des risques, auto- valuation des risques). La maîtrise des risques op rationnels par la mise en place de mesures pr ventives (contrôles internes, proc dures, formation) et correctives (plans d'action, assurance, transfert). Le suivi des risques op rationnels par le reporting r gulier des indicateurs de risque, l'audit interne et externe, et le contrôle permanent. La gouvernance des risques op rationnels par l'implication du conseil d'administration, du comit de direction g n rale, du comit de pilotage et gestion des risques, et de la direction g n rale en charge des risques groupe. L' tude a galement montr que la gestion des risques op rationnels a un impact positif sur la performance financière des banques marocaines cot es en bourse. En effet, les auteurs ont trouv une corr lation significative entre les indicateurs de performance financière (produit net bancaire, r sultat net d'exploitation, coefficient d'exploitation, rentabilit des capitaux propres et rentabilit des actifs) et les variables li es à la gestion des risques op rationnels (capital r glementaire allou au risque op rationnel, nombre d'incidents d clar s, nombre de contrôles effectu s). Par ailleurs, une autre tude r alis e par El Khattabi (2018) https://www.researchgate.net/publication/371304923_La_gestion_du_risque_operationnel_au_sein_des_banques_marocaines_vers_une_standardisation_des_approches_de_gestion a analys les pratiques de gestion du risque op rationnel au sein de six banques marocaines (Attijariwafa Bank, BMCE Bank of Africa, Banque Centrale Populaire, Cr dit Agricole du Maroc, Cr dit du Maroc et Soci t G n rale Maroc). L'auteur a constat que les banques marocaines ont adopt des approches de gestion du risque op rationnel similaires, bas es sur les recommandations du Comit de Bâle et les directives de Bank Al-Maghrib. Il a galement relev que les banques marocaines utilisent principalement l'approche standardis e pour calculer le capital r glementaire requis pour couvrir le risque op rationnel. Cette approche consiste à appliquer un coefficient fixe aux produits nets bancaires par ligne d'activit . L'auteur a soulign que cette approche pr sente des limites, car elle ne reflète pas la r alit du risque op rationnel et ne tient pas compte de la diversit des profils de risque des banques. Il a donc sugg r que les banques marocaines voluent vers des approches plus avanc es, bas es sur des modèles internes qui prennent en compte les sp cificit s de chaque banque. En conclusion, on peut dire que la gestion du risque op rationnel dans les banques marocaines a connu une am lioration significative, grâce à la mise en place d'un dispositif de gestion global et int gr , conforme aux normes internationales et aux exigences du r gulateur national. Cette gestion a permis aux banques marocaines de renforcer leur r silience face aux v nements impr vus, et d'am liorer leur performance financière. Toutefois, il reste encore des marges de progression, notamment en matière de calcul du capital r glementaire, qui pourrait être affin par l'utilisation d'approches plus avanc es et adapt es à chaque banque. Quel est le niveau d'exposition aux de Risques Op rationnels des Banques Marocaine Il n'existe pas de classement officiel des banques marocaines selon leur niveau de risque op rationnel. Toutefois, on peut essayer d'appr cier ce risque à partir de certains indicateurs financiers, tels que le capital r glementaire allou au risque op rationnel, le nombre d'incidents d clar s, le nombre de contrôles effectu s, ou encore le ratio de couverture du risque op rationnel. Selon les donn es publi es par Bank Al-Maghrib https://www.bkam.ma/A-propos/Gouvernance/Gestion-des-risques-et-continuite-d-activites, le capital r glementaire allou au risque op rationnel par les banques marocaines s' levait à 13,9 milliards de dirhams à fin 2020, soit 11,6% du capital r glementaire total. Ce montant varie selon les banques, en fonction de leur taille, de leur activit et de la m thode de calcul utilis e. Les banques marocaines utilisent principalement l'approche standardis e, qui consiste à appliquer un coefficient fixe aux produits nets bancaires par ligne d'activit . Selon les rapports annuels des banques marocaines cot es en bourse https://www.bkam.ma/Stabilite-financiere/Cadre-analytique/Cartographie-des-risques-systemiques, le capital r glementaire allou au risque op rationnel se r partissait comme suit en 2020 : Attijariwafa Bank : 4,3 milliards de dirhams, soit 12,5% du capital r glementaire total. BMCE Bank of Africa : 2,8 milliards de dirhams, soit 10,9% du capital r glementaire total. Banque Centrale Populaire : 2,6 milliards de dirhams, soit 10,7% du capital r glementaire total. Cr dit du Maroc : 1 milliard de dirhams, soit 14% du capital r glementaire total. Soci t G n rale Marocaine de Banques : 0,9 milliard de dirhams, soit 9% du capital r glementaire total. Cr dit Agricole du Maroc : 0,8 milliard de dirhams, soit 9,4% du capital r glementaire total. Ces chiffres ne reflètent pas n cessairement le niveau r el du risque op rationnel dans chaque banque, car ils d pendent aussi des produits nets bancaires et des coefficients appliqu s. Il faudrait donc les compl ter par d'autres indicateurs qualitatifs, tels que le nombre et la nature des incidents d clar s, le nombre et la fr quence des contrôles effectu s, ou encore le ratio de couverture du risque op rationnel. Ce ratio mesure la capacit d'une banque à absorber les pertes li es au risque op rationnel à partir de ses fonds propres. Il se calcule en divisant les fonds propres par le capital r glementaire allou au risque op rationnel. Malheureusement, ces indicateurs ne sont pas toujours disponibles ou comparables entre les banques. Il faudrait donc se r f rer aux rapports d'audit interne et externe, aux rapports du r gulateur ou aux tudes sp cialis es pour avoir une vision plus pr cise du risque op rationnel dans les banques marocaines. R f rences : https://www.ir-bankofafrica.ma/sites/default/files/2020-08/Organisation%20de%20la%20gestion%20des%20risques%20-%202019.pdf: Comit de Bâle sur le contrôle bancaire (2006). Principes fondamentaux pour un contrôle bancaire efficace. [1] http://revue-rimms.org/wp-content/uploads/2020/06/ARTICLE-7-ASMAE-MRABET-2.pdf: Chemlal, M., Benazzou, L., Mrabet, A., & Gharib, B. (2020). L’impact de la gestion des risques op rationnels sur la performance financière des banques marocaines cot es en bourse. Revue Internationale du Marketing et Management Strat gique (RIMMS), 1(2), 101-120. [2] https://www.researchgate.net/publication/371304923_La_gestion_du_risque_operationnel_au_sein_des_banques_marocaines_vers_une_standardisation_des_approches_de_gestion: El Khattabi, A. (2018). La gestion du risque op rationnel au sein des banques marocaines : vers une standardisation des approches de gestion. Thèse de doctorat, Universit Mohammed V de Rabat. [3]

by Youness El Kandoussi | 10 months ago | 0 Comment(s) | 220 Share(s) | Tags : Finance Risk

État du développement du management du risque opérationnel dans le secteur financier marocain

Le risque op rationnel est un risque non financier qui peut avoir un impact n gatif sur la performance d'une organisation. Il peut être caus par une vari t de facteurs, tels que les erreurs humaines, les d faillances des systèmes, les catastrophes naturelles ou les actes de malveillance. Le secteur financier marocain est soumis à un cadre r glementaire strict en matière de gestion des risques, notamment le risque op rationnel. Ce cadre est bas sur les normes internationales d finies par le Comit de Bâle sur le contrôle bancaire (BCBS). Statistiques Selon une tude de Bank Al-Maghrib, le risque op rationnel repr sente environ 30 % du capital requis par les banques marocaines. Les principaux risques op rationnels auxquels sont expos es les banques marocaines sont les suivants : Les erreurs humaines (25 %) Les d faillances des systèmes (20 %) Les risques li s aux systèmes d'information (15 %) Les risques li s aux clients (10 %) Les risques li s aux produits (10 %) Évolutions Le management du risque op rationnel a connu un d veloppement significatif dans le secteur financier marocain au cours des dernières ann es. Cette volution est due à plusieurs facteurs, notamment : La mise en &oelig;uvre des normes internationales du BCBS La pression des investisseurs et des r gulateurs La prise de conscience croissante des risques op rationnels Perspectives Le management du risque op rationnel continuera à se d velopper dans le secteur financier marocain dans les ann es à venir. Cette volution sera port e par plusieurs facteurs, notamment : La digitalisation des activit s bancaires La complexification des produits et services financiers L' mergence de nouveaux risques op rationnels Recommandations Pour renforcer le management du risque op rationnel dans le secteur financier marocain, il est recommand de mettre en &oelig;uvre les mesures suivantes : D velopper une culture de la gestion des risques au sein des institutions financières Investir dans les technologies de l'information et de la communication Renforcer la coop ration entre les institutions financières et les r gulateurs Sources et liens Bank Al-Maghrib, "Rapport sur le risque op rationnel dans le secteur bancaire marocain" (2022) Comit de Bâle sur le contrôle bancaire, "Basel III: International framework for liquidity risk measurement, standards and monitoring" (2013) International Auditing and Assurance Standards Board (IAASB), "International Standards on Auditing (ISAs)" International Organization for Standardization (ISO), "ISO 31000:2018 Risk management - Guidelines" Conclusion Le management du risque op rationnel est une composante essentielle de la gestion d'une institution financière. Le secteur financier marocain a fait des progrès significatifs dans ce domaine, mais il reste encore des efforts à faire pour renforcer la culture de la gestion des risques et pour s'adapter aux nouveaux risques op rationnels.

by Youness El Kandoussi | 10 months ago | 0 Comment(s) | 181 Share(s) | Tags : Finance Risk

M3T Consulting and RiskNucleus® System help Moroccan financial institutions overcome operational risk challenges.

Moroccan financial institutions face a number of challenges in managing their operational risk, audit, and internal controls. These challenges include: The increasing complexity of financial products and services The growing number of regulations and compliance requirements A lack of awareness of operational risk and its impact on the financial institution. Inadequate systems and processes for managing operational risk. The increasing frequency and severity of cyberattacks The shortage of skilled staff Poor coordination between different departments within the financial institution. Here are some statistics: According to a recent study by the World Bank, operational risk costs Moroccan financial institutions an average of 1.5% of their annual revenue. The study also found that Moroccan financial institutions are more likely to experience operational risk events than their counterparts in other countries. A study by the World Bank found that operational risk costs the global financial sector an estimated $200 billion each year. The Basel Committee on Banking Supervision estimates that operational risk represents about 70% of the total risk faced by banks. A survey by the Association of Corporate Treasurers found that 60% of financial institutions have experienced an operational incident in the past year. The average cost of an operational incident is $1 million. M3T Consulting and RiskNucleus® System can help Moroccan financial institutions overcome these challenges by providing: A comprehensive operational risk management framework that is tailored to the specific needs of the institution A team of experienced consultants who can help implement the framework and train staff A state-of-the-art risk management software system called RiskNucleus® These statistics show that operational risk is a major challenge for financial institutions. M3T Consulting and RiskNucleus® System can help Moroccan financial institutions overcome these challenges and protect their businesses. RiskNucleus® is a in premises software system that helps financial institutions automate their operational risk management processes. The system provides a single view of risk across the entire organization, and it helps institutions to identify, assess, and mitigate risks. Contact M3T Consulting today to learn more about how we can help your institution overcome operational risk challenges. M3T Consulting and RiskNucleus® have a proven track record of helping financial institutions overcome operational risk challenges. We have helped over 100 institutions in the Middle East, Europe and North Africa region, and we have a team of experienced consultants who can help you implement a comprehensive operational risk management framework. Contact us today to learn more about how we can help your institution.

by Youness El Kandoussi | 10 months ago | 0 Comment(s) | 171 Share(s) | Tags : Finance Risk

Blockchain and its implications on Finance Management

Table of Contents Introduction. 2 Definition and overview of blockchain technology. 2 Importance of blockchain in finance management. 2 Purpose of the presentation. 2 Understanding Blockchain. 2 Basics of blockchain technology. 2 Distributed ledger. 2 Decentralization. 3 Cryptography. 3 Key components of a blockchain. 3 Blocks. 3 Transactions. 3 Consensus mechanism.. 3 Different types of blockchains. 3 Public blockchains. 3 Private blockchains. 3 Consortium blockchains. 3 III. Implications of Blockchain in Finance Management. 3 Enhanced Security and Transparency. 3 Immutable records and tamper resistance. 3 Auditability and traceability. 3 Efficient and Cost-Effective Transactions. 4 Eliminating intermediaries. 4 Faster settlements and reduced transaction costs. 4 Smart Contracts and Automation. 4 Introduction to smart contracts. 4 Streamlined processes and reduced paperwork. 4 Fraud Prevention and Risk Mitigation. 4 Increased trust through consensus. 4 Improved identity verification and KYC processes. 4 Use Cases of Blockchain in Finance Management. 4 Cross-Border Payments and Remittances. 4 Supply Chain Finance. 4 Trade Finance and Letters of Credit. 4 Asset Tokenization and Securities Trading. 4 Peer-to-Peer Lending and Crowdfunding. 5 Insurance Claims and Underwriting. 5 Challenges and Considerations. 5 Scalability and performance issues. 5 Regulatory and legal concerns. 5 Interoperability between different blockchains. 5 Privacy and data protection. 5 Future Outlook. 5 Emerging trends and developments. 5 Collaboration between traditional finance and blockchain. 5 Potential impact on financial institutions and intermediaries. 5 VII. Conclusion. 5 Recap of key points. 5 Summary of blockchain's implications on finance management. 6 Potential benefits and opportunities. 6 Closing remarks. 6 I. Introduction A. Definition and overview of blockchain technology Blockchain technology is a decentralized and distributed ledger that records transactions across multiple computers. It enables secure and transparent transactions without the need for intermediaries. B. Importance of blockchain in finance management Blockchain has significant implications for finance management. It enhances security, reduces costs, automates processes, and mitigates fraud risks, transforming the way financial transactions are conducted. C. Purpose of the presentation The purpose of this presentation is to provide an understanding of blockchain technology and its implications in finance management. We will explore the key components of blockchain, its benefits, and various use cases in the financial industry. II. Understanding Blockchain A. Basics of blockchain technology 1. Distributed ledger Blockchain utilizes a distributed ledger, where multiple participants maintain and validate the transaction records collectively. This eliminates the need for a central authority and enhances trust. 2. Decentralization Blockchain operates in a decentralized manner, meaning no single entity has control over the entire network. This ensures transparency, resilience, and reduces the risk of a single point of failure. 3. Cryptography Blockchain uses cryptographic techniques to secure transactions and ensure data integrity. It employs cryptographic hash functions and digital signatures to authenticate and protect the information stored on the blockchain. B. Key components of a blockchain 1. Blocks Blocks are the building blocks of a blockchain and contain a set of transactions. Each block is linked to the previous block through a cryptographic hash, forming a chain of blocks. 2. Transactions Transactions represent the exchange of assets or information on the blockchain. They are recorded in blocks and are typically validated by network participants through a consensus mechanism. 3. Consensus mechanism Consensus mechanisms ensure agreement among network participants on the validity of transactions. It enables trust and prevents fraudulent activities. Common consensus mechanisms include Proof of Work (PoW), Proof of Stake (PoS), and Practical Byzantine Fault Tolerance (PBFT). C. Different types of blockchains 1. Public blockchains Public blockchains are open and accessible to anyone. They are maintained by a decentralized network of participants, and anyone can join the network, validate transactions, and create blocks. Bitcoin and Ethereum are examples of public blockchains. 2. Private blockchains Private blockchains are restricted to a specific group of participants. They provide privacy and control over the network, making them suitable for enterprises and organizations. Access to the blockchain is permissioned, and participants are often known entities. 3. Consortium blockchains Consortium blockchains are a hybrid between public and private blockchains. They are operated and maintained by a consortium or a group of organizations that have shared control over the network. Consortium blockchains offer a balance between openness and control. III. Implications of Blockchain in Finance Management A. Enhanced Security and Transparency 1. Immutable records and tamper resistance Blockchain's immutability ensures that once a transaction is recorded on the blockchain, it cannot be altered or deleted. This provides a high level of security and reduces the risk of fraud and tampering. 2. Auditability and traceability Blockchain's transparent nature enables easy auditing of transactions. Each transaction is recorded on the blockchain, creating an auditable trail of activities. This enhances transparency and accountability in financial transactions. B. Efficient and Cost-Effective Transactions 1. Eliminating intermediaries Blockchain eliminates the need for intermediaries, such as banks or clearinghouses, in financial transactions. This reduces costs, speeds up processes, and enables direct peer-to-peer transactions. 2. Faster settlements and reduced transaction costs Blockchain enables near-instantaneous settlements compared to traditional systems that may take days. It also reduces transaction costs by removing intermediaries and streamlining processes. C. Smart Contracts and Automation 1. Introduction to smart contracts Smart contracts are 2. Streamlined processes and reduced paperwork Smart contracts automate and streamline various financial processes, eliminating the need for manual paperwork and reducing human errors. This increases efficiency and accelerates transaction processing. D. Fraud Prevention and Risk Mitigation 1. Increased trust through consensus Blockchain's consensus mechanisms foster trust and prevent fraudulent activities. The distributed nature of blockchain ensures that transactions are verified by multiple participants, reducing the risk of fraud or manipulation. 2. Improved identity verification and KYC processes Blockchain technology can enhance identity verification and Know Your Customer (KYC) processes. It allows for secure storage and sharing of verified user data, reducing the risk of identity theft and fraud. IV. Use Cases of Blockchain in Finance Management A. Cross-Border Payments and Remittances Blockchain facilitates faster and cheaper cross-border payments by eliminating intermediaries, reducing fees, and providing real-time transaction tracking. B. Supply Chain Finance Blockchain enhances supply chain finance by enabling transparent and secure tracking of goods, verifying authenticity, reducing fraud, and streamlining payment processes. C. Trade Finance and Letters of Credit Blockchain simplifies trade finance by digitizing and automating the processing of letters of credit, reducing paperwork, and improving trust among participants. D. Asset Tokenization and Securities Trading Blockchain enables the tokenization of assets such as real estate or artwork, making them divisible and tradable. It enhances liquidity, simplifies ownership transfer, and reduces intermediaries in securities trading. E. Peer-to-Peer Lending and Crowdfunding Blockchain platforms facilitate peer-to-peer lending and crowdfunding by connecting borrowers directly with lenders, automating loan agreements, and providing transparency and auditability. F. Insurance Claims and Underwriting Blockchain streamlines insurance processes by automating claims processing, reducing fraud through transparent records, and improving underwriting accuracy through access to verified data. V. Challenges and Considerations A. Scalability and performance issues Blockchain faces challenges in scaling to accommodate a large number of transactions and maintaining performance. Solutions like layer-two protocols and sharding are being explored to address these challenges. B. Regulatory and legal concerns Blockchain's decentralized nature raises regulatory and legal concerns, such as data privacy, cross-border transactions, and compliance with existing financial regulations. Regulatory frameworks need to evolve to address these issues. C. Interoperability between different blockchains Interoperability between different blockchains is essential for seamless integration and exchange of assets and information. Efforts are underway to develop standards and protocols for interoperability. D. Privacy and data protection While blockchain provides transparency, preserving privacy and protecting sensitive data is crucial. Privacy-enhancing technologies like zero-knowledge proofs and secure multiparty computation are being developed to address these concerns. VI. Future Outlook A. Emerging trends and developments Emerging trends include the integration of blockchain with other technologies like artificial intelligence, Internet of Things, and decentralized finance (DeFi). These developments have the potential to revolutionize finance management further. B. Collaboration between traditional finance and blockchain Traditional financial institutions are exploring blockchain technology and collaborating with blockchain startups to leverage its benefits. Partnerships and consortia are being formed to drive innovation and adoption in the financial industry. C. Potential impact on financial institutions and intermediaries Blockchain has the potential to disrupt traditional financial institutions and intermediaries. They will need to adapt and innovate to remain competitive in a decentralized and digitally transformed financial landscape. VII. Conclusion A. Recap of key points Blockchain technology is a decentralized and transparent ledger that offers enhanced security, efficiency, automation, and fraud prevention in finance management. B. Summary of blockchain's implications on finance management Blockchain technology improves security, reduces costs, stream C. Potential benefits and opportunities Implementing blockchain in finance management can lead to reduced transaction costs, faster settlements, improved fraud prevention, and increased efficiency and transparency, unlocking new opportunities for innovation and growth. D. Closing remarks Blockchain technology has the potential to reshape the finance industry by revolutionizing how transactions are conducted, recorded, and verified. Embracing blockchain's capabilities can drive a more secure, efficient, and inclusive financial ecosystem.

by Youness El Kandoussi | 1 year ago | 0 Comment(s) | 228 Share(s) | Tags : Finance

Risks in Islamic Finance Operational Risk Part One

Contents 1 Abstract.. 4 2 Introduction.. 4 3 Objective: 5 4 Plan of the paper: 5 5 Chapter 1: Risk History and definitions. 5 5.1 Introduction: 5 5.2 Section I: Risk Management History: 6 5.3 Section 2: Definitions of Risk Management: 7 5.3.1 Market Risk: 8 5.3.2 Credit Risk. 8 5.3.3 Liquidity Risk: 8 5.3.4 Operational Risk: 9 6 Chapter 2: Evolvement of Risk Management: Basel I, II and III. 10 6.1 Introduction: 10 6.2 Section I: Basel I and its shortcomings: 11 6.3 Section 2: Basel II 12 6.4 Section 3: Basel III 13 6.4.1 Summary OF changes. 13 7 Chapter 3: Risk in Islamic Finance Institutions. 14 7.1 Introduction: 14 7.2 Section 1: Islamic Finance Institutions are unique. 16 7.3 Section 2: Types of Risks in the IFIs: 17 8 Chapter 4: Islamic Finance Products, Risks and the key challenges. 19 8.1 Introduction: 19 8.2 Section 1: Risks in Islamic Finance Products: 19 8.2.1 Risks in Musharakah Contracts: 21 8.2.2 Risks in Mudarabah contract: 22 8.2.3 Risks in Murabahah Contract: 24 8.2.4 Risks in Salam Contract: 24 8.2.5 Risks in Istisnaa Contract 25 8.2.6 Risks in Iajrah Contract: 26 8.3 Section 2: Challenges of Risk Management in Islamic Finance Products. 27 9 Chapter 5: Operational Risk in Islamic Finance Institutions. 28 9.1 Introduction: 28 9.2 Section 1: Operational Risk in Musharakah contract: 28 9.3 Section 2: Operational Risk in Mudarabah contract. 29 9.4 Section 3: Operational Risk in Murabahah contract. 29 9.5 Operational Risk in Salam contract. 30 9.6 Operational Risk in Istisnaa contract: 30 9.7 Operational Risk in Ijarah contract: 30 10 Conclusion.. 30 10.1 Findings. 30 10.2 Recommendations. 31 11 References. 33 1 Abstract As IFIs are growing extensively and expected to grow up to 15% in the coming years, it is primordial that all the industry stakeholders start to invest their efforts to develop the Risk Management disciplines. The IFSB and AAOIFI are not sparing any effort to guide and participate in shaping the IF Risk Management, however, they tend to be inspired by the existing frameworks historically developed for Conventional Banks. Islamic Finance contracts are very different in nature and in substance from conventional banks, thus, the conventional Risk Management cannot cater for their uniqueness. This paper tried to highlight uniqueness of risk aspects within the IF contracts, and focused on Operational Risk, which is in my opinion in the major risk for IFI. 2 Introduction Risk Management have evolved since its first appearance after the World War II. The Bank of International Settlement have tried to adapt to the changes in the Finance industry and issued 3 version of the Basel Guidelines on Capital Requirements (Basel I, II and III). These guidelines have identified Capital Requirements for Credit Risk, Market Risk and Operational Risk. They also issued Sound Practices for Risk Management for each type of Risk. With the venue of the Islamic Finance Industry in the 1960s, Risk Management tools had to adapt to the uniqueness of their products. IFSB and AOIIFI have invested huge efforts in developing Risk Management guidelines for IFIs. Scholars and Islamic Finance practitioners issued multitude of papers attempting to circle aspects of Risk in the Islamic Finance Contracts. They have demonstrated that Islamic Finance encompasses other types of Risk that are unknown to conventional Banks (Fiduciary Risk, Sharia non-compliance Risk, Commercial Displaced Risk, etc.) Many of those scholars have also found out that the IFIs are more exposed to Operational Risk than the conventional banks, mainly due to the complexity of the contracts and their execution. This research is an attempt to add some more light on Risks faced by Islamic Finance Institution with a special focus on Operational Risk. 3 Objective: Risk Management in IFIs tends to be complex and least understood by the business and even by the Risk Management practitioners, in this research I will attempt to define Risks in IFIs and clarify its specifications by demonstrating its uniqueness, especially in the Islamic Finance contracts, where each contract can encompass more than one type of Risk. I will also try to cover some more details of Operational Risk aspects in the IF contracts and demonstrate its importance and complexity during the lifecycle. That being discussed I will propose some actions that can enhance the Operational Risk Management within the IFIs. 4 Plan of the paper: In this paper, I will be defining Risk Management in general in Financial Institutions and its degree of evolvement especially in conventional banking, how Risk is different in Islamic Financial Institutions from conventional banks, their instruments and what are the key challenges. Then I will be discussing the Operational Risk Management in Islamic Finance Institutions and its specifications. 5 Chapter 1: Risk History and definitions 5.1 Introduction: Risk Management emerged after the World War II, and began to be studied in universities as a discipline with the two academic books ( Mehr and Hedges (1963) and Williams and Hems (1964)[1]. Risk Management was, for a long time, the ultimate tool for Insurance Industry aiming to mitigate Risks related to individuals and companies from losses incurred from accidents[2] After 1950s, and due to the increasing costs of insurance, various Risk Management activities were introduced to the business (e.g. business continuity, self-insurance). Derivatives were introduced after 1970s to mitigate the faced risks. Market, Credit, and Operational Risk Management tools were introduced to manage the emerging risks from the intensified activities with insurance and Finance industries (consequently after 1980s for Market and Credit and 1990s for Operational Risk)[3] The objective of a financial institution (or for any kind of business) is to maximize shareholders’ profits by adding value and best usage of available resources. Financial institutions, in particular, have to manage Risks to achieve the aforesaid objective. Risk is defined as a possible adverse, one or more, outcomes, it is unknown for its intrinsic volatility and unpredictability. Financial institutions face different types of Risks. Business Risks, which “arises from the nature of a firm’s business. It relates to factors affecting the product market. Financial risk arises from possible losses in financial markets due to movements in financial variables [4]”. Oldfield and Santomero classifies Risk in three types: risks that can be eliminated, those that can be transferred to others, and the risks that can be managed by the institution. [5]” Besides the above given definitions, Risk can also be defined as Financial Risk, i.e. Credit Risk and Market Risk, and non-Financial Risk, i.e., among others, Operational Risk, Legal Risk, Reputational Risk and Strategic Risk.[6] 5.2 Section I: Risk Management History: Risk Management historically was the main objective of the insurance industry. After the World War II, large companies started to mitigate their risks by introducing Self-Insurance techniques. It was largely applied to cover adverse financial impacts consequent of events of losses or Market volatility. After 1970s, Financial Risk Management emerges as a cornerstone for multitude of companies including banks. In Fact, Stock Market prices, exchange rates, commodity prices, were their main concerns. Table 1: Milestones in the History of Risk Management[7] In 1990s Risk Management took more momentum and became a high priority matter for corporates, Board of Director have now the responsibility of oversight and monitoring policies effected by the Board Audit and Risk Management Committees. Financial Institution, after 2000s are required to implement capital reserves for risks, especially after the major defaults and the Enron bankruptcy case. Basel II (2004) issued guidelines on more robust capital requirements on banks for Credit Risk, also introduced rules on managing Operational Risk. In 2010 Basel III came as a response to the 2008 subprime crisis, with more constraints on capital requirements and new Liquidity Risk Management guidelines. 5.3 Section 2: Definitions of Risk Management: According to Wikipedia, “Risk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events[8] or to maximize the realization of opportunities. Risk management’s objective is to assure uncertainty does not deflect the endeavor from the business goals.[9]” Financial Institutions face generally two types of Risk, Financial and Non-Financial[10] (Gleason 2000). Financial Risks are those due Market volatility (Market Risk), and those due customers’ defaults (Credit Risk). Non-Financial Risk includes, but not limited to, Operational Risk, Legal Risk, Reputational Risk, Regulatory Compliance Risk. 5.3.1 Market Risk: Market Risk is defined as the risk from adverse volatility of traded instruments and assets in a well-defined Market[11]. Market Risk can affect both banking and trading books. In the sense that it is originated from equity price risk, interest rate risk, currency risk, and commodity price risk. Market Risk is said systematic when it arises due to the general volatility of prices and overall changes in policies in the economy. When the price of a specific asset or instruments changes due to events inherent to it, it is categorized as unsystematic Risk. 5.3.2 Credit Risk “Credit risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. The goal of credit risk management is to maximize a bank's risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. Banks need to manage the credit risk inherent in the entire portfolio as well as the risk in individual credits or transactions. Banks should also consider the relationships between credit risk and other risks. The effective management of credit risk is a critical component of a comprehensive approach to risk management and essential to the long-term success of any banking organization.”[12] Credit Risk is the risk that counterparty will fail to meet its obligations timely and fully in accordance with the agreed terms[13]. 5.3.3 Liquidity Risk: The Principles for Sound Liquidity Risk Management and Supervision[14] (BCBS 2008) defines Liquidity as “the ability of a bank to fund increases in assets and meet obligations as they come due, without incurring unacceptable losses.” Liquidity Risk arises then from adverse circumstances that hurdles a bank to normally operate and meet its liabilities when due. Funding Liquidity Risk occurs when banks are unable to secure funds at a reasonable cost from borrowing, Asset Liquidity Risk arises when banks face difficulties to generate liquidity from sale of assets.[15] 5.3.4 Operational Risk: The BCBS Principles for the Sound Management of Operational Risk defines Operational Risk 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.[16] Operational Risk was for a long time out of the radar of the corporates and scholars, it was not quite understood. Power writes: “Operational risk was conceived as a composite term for a wide variety of organizational and behavioural risk issues which were traditionally excluded from formal definitions of market and credit risk. The explosion of operational risk discourse gave new structure and rationality to what had traditionally been regarded as a risk management residual and negatively described as non-financial risk.”[17] The Bank of international Settlements (BIS) have categorized Operational Risk into four causal categories[18]: · Process · Business Process (lack of proper due diligence, inadequate/problematic account reconciliation, etc.) · Business Risks (merger risk, new product risk, etc.) · Errors and Omissions (inadequate/problematic security, inadequate/problematic quality control, etc.) · Specific Liabilities (employee benefits, employer, directors and officers, etc.) · People · Employee Errors (general transaction errors, incorrect routing of transaction, etc.) · Human Resource Issues (employee unavailability, hiring/firing, etc.) · Personal Injury – Physical Injury (bodily injury, health and safety, etc.) Personal Injury – Non–Physical Injury (libel/defamation/slander, discrimination/harassment, etc.) · Wrongful Acts (fraud, trading misdeeds, etc.) · Information Technology · General Technology Problems (operational error – technology related, unauthorized use/misuse of technology, etc.) · Hardware (equipment failure, inadequate/unavailable hardware, etc.) · Security (hacking, firewall failure, external disruption, etc.) · Software (computer virus, programming bug, etc.) · Systems (system failures, system maintenance, etc.) · Telecommunications (telephone, fax, etc.) · External Events · Disasters (natural disasters, non–natural disasters, etc.) · External Misdeeds (external fraud, external money laundering, etc.) · Litigation/Regulation (capital control, regulatory change, legal change, etc.) · Relationships · Legal/Contractual (securities law violations, legal liabilities, etc.) · Negligence (gross negligence, general negligence, etc.) · Sales Discrimination (lending discrimination, client Discrimination, etc.) · Sales Related Issues (churning, sales misrepresentation, high pressure sales tactics, etc.) · Specific Omissions (failure to pay proper fees, failure to file proper report, etc.) Gene Alvares attempted a mapping exercise between the Causal Categories and Basel Risk Types (Alvares, Global Association of Risk Professionals GARP studies. 2002). Mapping illustration between the Basel Committee’s proposed operational risk event classification scheme and Zurich IC2 format. (Alvarez, 2002)[19] References Georges Dionne, Risk Management: History and Critique, March 2013 Harrington and Neihaus, 2013, Georges Dionne, Risk Management: History and Critique, March 2013 Jorion and Khoury 1996, reference cited by Tariqullah Khan Habib Ahmed: Risk Management: An Analysis Of Issues In Islamic Financial Industry, 2001, Islamic Development Bank, Islamic Research and Training Institute Oldfield and Santomero (1997), reference cited by Tariqullah Khan Habib Ahmed: Risk Management: An Analysis Of Issues In Islamic Financial Industry, 2001, , Islamic Development Bank, Islamic Research and Training Institute Tariqullah Khan Habib Ahmed: Risk Management: An Analysis Of Issues In Islamic Financial Industry, 2001, Islamic Development Bank, Islamic Research and Training Institute Hubbard, Douglas (2009). The Failure of Risk Management: Why It's Broken and How to Fix It. John Wiley & Sons. (Wikipedia) Antunes, Ricardo; Gonzalez, Vicente (3 March 2015). "A Production Model for Construction: A Theoretical Framework". Buildings. 5 (1): 209–228. doi:10.3390/buildings5010209. (Wikipedia) BCBS - Principles for the Management of Credit Risk - final document, September 2000 BCBS - Principles for Sound Liquidity Risk Management and Supervision - final document, September 2008 BCBS Principles for the Sound Management of Operational Risk, 2011 Power p. 103 Cited by Johannes Gaus aus Böblingen, The Risks of Financial Risk Management, Master-Thesis, Economics of Financial Institutions European Business School, Department Corporate Management & Economics, Zeppelin University Marinoiu Ana Maria, Bucharest University of Economics, Faculty of International Business and Economics, Operational Risk In International Business: Taxonomy And Assessment Methods, Federal Reserve Bulletin, September 2003, Capital Standards for Banks: The Evolving Basel Accord BCBS, Basel II: The New Basel Capital Accord - third consultative paper April 2003 and Revised international capital framework, June 2006 Basel III: international regulatory framework for banks Sean Kenny, To What Extent were the Limitations of the Previous Basel Accords (I & II) overlooked by Basel III?, Master programme in Economic History, Lund University, School of Economics and Management, June 2011 BCBS- Pillar 2 (Supervisory Review Process), the New Basel Capital Accord, Principal 2 Basel II, Tamer Bakiciol Nicolas Cojocaru-Durand DongxuLu, December 2008 BIS, BCSB, Basel III: international regulatory framework for banks Basel Committee on Banking Supervision, Basel III: International Framework for Liquidity Risk Measurement, Standards and Monitoring, Dec 10, Bank for International Settlements. http://wwww.basel-ii-risk.com/basel-iii-guide-to-the-changes/ Ahmad Alharbi, Development of the Islamic Banking System, Journal of Islamic Banking and Finance June 2015, Vol. 3, No. 1 Syed Ehsan Ullah Agha, RISK MANAGEMENT IN ISLAMIC FINANCE: AN ANALYSIS FROM OBJECTIVES OF SHARI’AH PERSPECTIVE, International Journal of Business, Economics and Law, Vol. 7, Issue 3 (Aug.) 2015 Specifics of Risk Management in Islamic Finance and Banking, with Emphasis on Bosnia and Herzegovina, E.Kozarević, M.Baraković Nurikić & N.Nuhanović, Bahar/Spring 2014, Volume 4, Issue 1, Çankırı Karatekin University, Journal of The Faculty of Economics, and Administrative Sciences. Ioannis Akkizidis and Sunil Kumar Khandelwal, Financial Risk Management for Islamic Banking and Finance, Palgrave Macmillan. Standing Committee for Economic and Commercial Cooperation of the Organization of Islamic Cooperation (COMCEC), Risk Management in Islamic Financial Instruments, COMCEC Coordination Office, September 2014. ISLAMIC FINANCIAL SERVICES BOARD, GUIDING PRINCIPLES OF RISK MANAGEMENT FOR INSTITUTIONS (OTHER THAN INSURANCE INSTITUTIONS) OFFERING ONLY ISLAMIC FINANCIAL SERVICES, December 2005. Nurhafiza Abdul Kader Malim PhD, Islamic Banking and Risk Management: Issues and Challenges, Journal of Islamic Banking and Finance Oct.- Dec. 2015. Hennie van Greuning Zamir Iqbal, Risk Analysis for Islamic Banks, THE WORLD BANK Washington, D.C., December 2008. Ahmad Mohamed Rahim, Operational Risks in Islamic Profit Sharing Contracts and Ways to Overcome Them, MSc in Islamic Finance, The Global University of Islamic Finance, October 2014 (http://www.inceif.org/research-bulletin/operational-risks-islamic-profit-sharing-contracts-ways-overcome/) [1] Georges Dionne, Risk Management: History and Critique, March 2013, p. 1 [2] Harrington and Neihaus, 2013, Georges Dionne, Risk Management: History and Critique, March 2013, p. 1 [3] Georges Dionne, Risk Management: History and Critique, March 2013, p. 1 [4] Jorion and Khoury 1996, p. 2, reference cited by Tariqullah Khan Habib Ahmed: Risk Management: An Analysis Of Issues In Islamic Financial Industry, 2001,p. 26, Islamic Development Bank, Islamic Research and Training Institute [5] Oldfield and Santomero (1997), reference cited by Tariqullah Khan Habib Ahmed: Risk Management: An Analysis Of Issues In Islamic Financial Industry, 2001,p. 27, Islamic Development Bank, Islamic Research and Training Institute [6] Tariqullah Khan Habib Ahmed: Risk Management: An Analysis Of Issues In Islamic Financial Industry, 2001,p. 28, Islamic Development Bank, Islamic Research and Training Institute [7] Georges Dionne, Risk Management: History and Critique, March 2013, p. 6 [8] Hubbard, Douglas (2009). The Failure of Risk Management: Why It's Broken and How to Fix It. John Wiley & Sons. p. 46. (Wikipedia) [9] Antunes, Ricardo; Gonzalez, Vicente (3 March 2015). "A Production Model for Construction: A Theoretical Framework". Buildings. 5 (1): 209–228. doi:10.3390/buildings5010209. (Wikipedia) [10] Tariqullah Khan Habib Ahmed: Risk Management: An Analysis of Issues in Islamic Financial Industry, 2001, p. 28, Islamic Development Bank, Islamic Research and Training Institute [11] Tariqullah Khan Habib Ahmed: Risk Management: An Analysis of Issues in Islamic Financial Industry, 2001, p. 28, Islamic Development Bank, Islamic Research and Training Institute [12] BCBS - Principles for the Management of Credit Risk - final document, September 2000 [13] Tariqullah Khan Habib Ahmed: Risk Management: An Analysis of Issues in Islamic Financial Industry, 2001, p. 29, Islamic Development Bank, Islamic Research and Training Institute [14] BCBS - Principles for Sound Liquidity Risk Management and Supervision - final document, September 2008 [15] Tariqullah Khan Habib Ahmed: Risk Management: An Analysis of Issues in Islamic Financial Industry, 2001, p. 29, Islamic Development Bank, Islamic Research and Training Institute [16] BCBS Principles for the Sound Management of Operational Risk, 2011, p. 3 [17] Power p. 103 Cited by Johannes Gaus aus Böblingen, The Risks of Financial Risk Management, Master-Thesis, Economics of Financial Institutions European Business School, Department Corporate Management & Economics, Zeppelin University, p. 38 [18] Marinoiu Ana Maria, Bucharest University of Economics, Faculty of International Business and Economics, Operational Risk In International Business: Taxonomy And Assessment Methods, P. 196 [19] Marinoiu Ana Maria, Bucharest University of Economics, Faculty of International Business and Economics, Operational Risk in International Business: Taxonomy and Assessment Methods, P. 197

by Youness El Kandoussi | 1 year ago | 0 Comment(s) | 244 Share(s) | Tags :

Targeted Selection with behavioral interviewing

Behavioral interviewing is a method of evaluating job candidates based on their past behavior and performance in specific situations. It involves asking candidates targeted questions about their previous experiences and the specific actions they took in order to assess their skills, knowledge, and suitability for the role.Behavioral interviewing is based on the belief that a person's past behavior is the best predictor of their future behavior. Therefore, by asking candidates about their past experiences and the actions they took in specific situations, it is possible to get a sense of how they are likely to behave in similar situations in the future.Behavioral questions typically begin with phrases such as "Tell me about a time when..." or "Describe a situation in which..." and require the candidate to provide a specific example of their past behavior. This can help to provide a more detailed and accurate assessment of the candidate's skills and abilities than more general questions about their qualifications and experience.Behavioral interviewing can be an effective tool for targeted selection because it allows the interviewer to focus on the specific skills and experiences that are relevant to the role. It can also help to identify candidates who are a good fit for the company's culture and values.

by Youness El Kandoussi | 1 year ago | 0 Comment(s) | 236 Share(s) | Tags :

Should Microsoft Be Sued for Not Ensuring Business Continuity of Its Global Customers?

Context In the last few days, several businesses, including aviation and banking sectors, experienced significant disruptions due to issues with Microsoft services. This outage affected various cloud-based services, including Microsoft 365, Azure, and Teams. The interruptions were caused by a combination of network configuration changes and infrastructure issues within Microsoft's global network (https://www.reedsmith.com/en/perspectives/2024/02/business-interruption-claims-in-2024-a-global-perspective) (https://status.cloud.microsoft/#:~:text=URL%3A%20https%3A%2F%2Fstatus,100). The outage highlighted the increasing reliance of global industries on cloud services and the significant impact such disruptions can have on business operations, from communication breakdowns to halted transactions (https://www.businesswire.com/news/home/20240116375142/en/Allianz-Risk-Barometer-A-Cyber-Event-Is-the-Top-Global-Business-Risk-for-2024). While Microsoft worked to resolve the issues, it underscored the importance of robust cyber risk management and contingency planning in mitigating the effects of such outages (https://www.nortonrosefulbright.com/en/knowledge/publications/20530078/the-cyber-risks-faced-by-the-aviation-industry---ten-things-to-know). The recent Microsoft outages, which disrupted services like Microsoft 365, Teams, and Outlook, were primarily caused by a series of technical and security issues. Initially, Microsoft identified that a "wide-area networking (WAN) routing change" led to connectivity problems. This change triggered issues with network latency and timeouts, affecting how packets were forwarded across Microsoft's global network. This impacted users' ability to access various cloud services, including Azure, SharePoint, and OneDrive (https://www.bankinfosecurity.com/microsoft-365-cloud-service-outage-disrupts-users-worldwide-a-21017) (https://www.techradar.com/news/this-is-what-caused-the-recent-huge-microsoft-365-and-teams-outage). Additionally, Microsoft faced cyber risks, particularly distributed denial-of-service (DDoS) attacks. These attacks, launched by a group known as Storm-1359, aimed to disrupt services by overwhelming Microsoft's infrastructure with malicious traffic. The DDoS attacks targeted layer 7 of the OSI model, affecting HTTP(S) traffic and causing resource exhaustion and slowdowns (https://msrc.microsoft.com/blog/2023/06/microsoft-response-to-layer-7-distributed-denial-of-service-ddos-attacks/). To mitigate these issues, Microsoft rolled back the problematic network changes and implemented additional protections to prevent similar disruptions in the future. These measures included enhancing their Web Application Firewall (WAF) and adding stricter controls on network command executions to avoid unintended consequences from network changes (https://www.bankinfosecurity.com/microsoft-experiences-second-major-cloud-outage-in-2-weeks-a-21134) (https://www.techradar.com/news/this-is-what-caused-the-recent-huge-microsoft-365-and-teams-outage). In recent days, significant disruptions in Microsoft services have caused major headaches for businesses worldwide. Industries ranging from aviation to banking found themselves grappling with unexpected downtime, impacting critical operations and highlighting a growing reliance on cloud-based services. This article explores whether Microsoft should be held legally accountable for failing to ensure business continuity for its global customers. The Outage and Its Impacts The recent Microsoft outages affected a range of cloud services, including Microsoft 365, Azure, and Teams. These disruptions were triggered by a combination of network configuration changes and infrastructure issues within Microsoft’s global network. Specifically, a "wide-area networking (WAN) routing change" led to severe connectivity problems. This change caused network latency and timeouts, disrupting the forwarding of data packets across Microsoft's global network. As a result, users experienced significant issues accessing cloud services such as Azure, SharePoint, and OneDrive. In addition to technical glitches, Microsoft also faced cyber threats, particularly distributed denial-of-service (DDoS) attacks. A group known as Storm-1359 targeted Microsoft’s infrastructure with malicious traffic, aiming to exhaust resources and slow down services. These attacks impacted layer 7 of the OSI model, affecting HTTP(S) traffic and causing further disruptions. The Importance of Business Continuity These outages underscore the critical role that cloud services play in modern business operations. From communication breakdowns to halted transactions, the ripple effects of such disruptions can be severe. The aviation and banking sectors, in particular, experienced significant operational impacts, illustrating the high stakes involved. As businesses increasingly rely on cloud services for their day-to-day operations, the importance of robust cyber risk management and contingency planning becomes more apparent. Legal and Ethical Considerations Given the scale and impact of these disruptions, the question arises: should Microsoft be sued for not ensuring business continuity? On one hand, businesses rely on service level agreements (SLAs) with cloud providers like Microsoft to guarantee a certain level of uptime and reliability. When these expectations are not met, it can lead to substantial financial losses and operational challenges. Businesses may argue that Microsoft failed to uphold its end of the agreement, warranting legal action to recover damages. On the other hand, the complexity of managing a global cloud infrastructure means that occasional outages are inevitable. Microsoft did take immediate steps to mitigate the issues, rolling back problematic network changes and enhancing protections against future disruptions. These efforts demonstrate a commitment to resolving the issues and improving service reliability. Cyber Risk Management and Contingency Planning The outages highlight the need for businesses to adopt comprehensive cyber risk management strategies and contingency plans. Relying solely on a single cloud provider can expose businesses to significant risks. Diversifying cloud services and implementing robust backup systems can help mitigate the impact of such outages. Additionally, regular testing and updating of contingency plans can ensure that businesses are better prepared to handle unexpected disruptions. Conclusion While the recent Microsoft outages have caused significant disruptions, suing the tech giant may not be the most effective solution. Instead, businesses should focus on enhancing their own cyber risk management and contingency planning efforts. By diversifying cloud services and implementing robust backup systems, businesses can better protect themselves against future outages. At the same time, cloud providers like Microsoft must continue to improve their infrastructure and security measures to minimize the risk of such disruptions and maintain customer trust. The recent events serve as a stark reminder of the interconnected nature of modern business operations and the importance of resilience in the face of unexpected challenges. References https://www.reedsmith.com/en/perspectives/2024/02/business-interruption-claims-in-2024-a-global-perspective https://status.cloud.microsoft/#:~:text=URL%3A%20https%3A%2F%2Fstatus,100). (https://www.businesswire.com/news/home/20240116375142/en/Allianz-Risk-Barometer-A-Cyber-Event-Is-the-Top-Global-Business-Risk-for-2024 https://www.nortonrosefulbright.com/en/knowledge/publications/20530078/the-cyber-risks-faced-by-the-aviation-industry---ten-things-to-know https://www.bankinfosecurity.com/microsoft-365-cloud-service-outage-disrupts-users-worldwide-a-21017 https://www.techradar.com/news/this-is-what-caused-the-recent-huge-microsoft-365-and-teams-outage https://msrc.microsoft.com/blog/2023/06/microsoft-response-to-layer-7-distributed-denial-of-service-ddos-attacks/

by Youness El Kandoussi | 1 week ago | 0 Comment(s) | 11 Share(s) | Tags :

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