Op risk assessment hampered by lack of reliable data

Inadequacy of loss expectation data is a major cause of modelling risk for operational risk strategies, said Carol Alexander, professor of the ISMA Centre at the University of Reading in the UK, at Risk's annual European conference.

The focus on operational risk has been increasing due to deregulation of capital flows and industries, the rapid growth of new companies and increased focus on “dubious accounting” practices, company fraud and Basel II, she said. However, accurate modelling of operational risk is hampered by a lack of data, said Alexander.

While Basel II calls for the assessment of operational risk, the process involves the quantitative modelling of it. One such approach is the loss model approach, which

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