Tall order: why a unified op risk taxonomy is still elusive
Banks vary in how they classify operational risk losses – and regulators are in no rush to change the status quo
Humans have an innate urge to classify: to put things in boxes and label them. Witness Carl Linnaeus’s taxonomy of the natural world, published in the 18th century and still in use today.
In a similar spirit, the Basel Committee on Banking Supervision first classified operational risk loss events as part of its Basel II capital reforms. More recently, industry consortium ORX released its own taxonomy of op risk loss types, which provided an updated and more granular version of its Basel
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