How op risk mitigants affect regulatory capital

For banks to develop an efficient operational risk hedging strategy, they need to consider the capital impact of the four main mitigant types: insurance, business continuity management, controls and staff training. By Niclas Hageback

As with any other risk types, levels of operational risk can be reduced through the use of mitigants. For a bank developing its op risk framework under the new Basel capital Accord’s advanced measurement approach (AMA), there are four main mitigants to consider: insurance, business continuity management, controls and staff training. AMA grants different capital recognition depending on the type of mitigant, but indirectly all of them will affect the amount of regulatory capital held against op