Technical paper/Operational risk
Evaluating cyclic risk propagation through an organization
Many large organizations have risk that propagates because of the dependencies between their various major organizational components. This paper addresses when cycles of dependencies exist in an organization or system of systems.
Does the source of information influence depositors’ withdrawal intentions during operational events?
The objective of this paper is to identify whether depositors’ intentions to withdraw funds during operational risk events differ based on the source of information.
Benchmarking operational risk stress testing models
This paper outlines several approaches to benchmarking operational loss projections under stressed scenarios using both accounting metrics and historical loss experience.
What is essential is invisible to the eye: prioritizing near misses to prevent future disasters
Near misses represent a primary information source to analyze the operational risk exposure of a company, since they can reveal gaps in the control environment. The model proposed in this paper aims at identifying the most dangerous events that could…
Strategic and technology risks: the case of Co-operative Bank
This paper studies the growth by acquisition strategy embarked upon by a mid-sized UK bank, the Co-operative Bank; this strategy was a disaster, leaving a heretofore successful bank in dire trouble and on the block for buyers at a substantial discount to…
An emergent taxonomy for operational risk: capturing the wisdom of crowds
In this paper, the author takes a data-driven approach and combines the individual active taxonomies of sixty large financial institutions (fifty-eight for construction and two for validation) to create a coherent new reference taxonomy: the ORX…
Incremental value-at-risk
This paper proposes a novel method for estimating future operational risk capital: incremental value-at-risk (IVaR)
Risk capital reserve and measurement precision in modeling heavy-tailed single operational losses
This paper provides a rationale for adopting quantitative buffer capital, designed to absorb variations due to measurement errors, especially those originating from the estimation risk.
Difference between the determinants of operational risk reporting in Islamic and conventional banks: evidence from Saudi Arabia
In this study, the author investigates the operational risk reporting practices of Islamic banking institutions (IBIs) and conventional banks (CBs) in Saudi Arabia. Moreover, the author explores the joint effect of banking characteristics, corporate…
Applying existing scenario techniques to the quantification of emerging operational risks
This paper sets out techniques for: (a) identifying systematically emerging threats, their timescales, and interrelationships (eg, feedback loops and domino effects); (b) quantifying operational risks through structured scenario analysis processes that…
On the selection of loss severity distributions to model operational risk
This paper presents truncation probability estimates for loss severity data and a consistent quantile scoring function on annual loss data as useful severity distribution selection criteria that may stabilize regulatory capital.
The use of business intelligence and predictive analytics in detecting and managing occupational fraud in Nigerian banks
The goal of this paper is to illustrate how Nigerian banks, and indeed banks elsewhere, can develop solutions that incorporate both BI and predictive analytics techniques in detecting, predicting, preventing and managing occupational fraud.
Quantification of operational risk: statistical insights on coherent risk measures
In this paper, the authors review some of the existing methods used to quantify operational risks in the banking and insurance industries.
The operational risk disclosure practices of banks: evidence from India and Romania
This paper compares the levels of operational risk disclosure in the banking industries of India and Romania.
Estimation of losses due to cyber risk for financial institutions
The objective of this paper is to analyze cyber risk from an operational risk perspective and to measure cyber risk empirically.
Introducing a novel system-of-systems axiomatic risk management technique for production systems
This paper focuses on conceptual and modeling frameworks in an attempt to explore qualitative and quantitative risk management techniques for hierarchical SoS risks, exemplifying the production systems for demonstration.
An alternative approach for the operational risk assessment of a new product
The aim of this paper is to provide a new operational risk management framework to identify and mitigate the operational risk exposure arising from a new product.
Operational risk measurement: a loss distribution approach with segmented dependence
This paper proposes an approach, called the loss distribution approach with segmented dependence (LDA-SD), which can model the different dependencies of HFLI and LFHI losses in the framework of LDA.
A review of the state of the art in quantifying operational risk
In this paper, the authors provide a comprehensive review of the different approaches developed to model operational risk, specifically focusing on the actuarial approach.
Global perspectives on operational risk management and practice: a survey by the Institute of Operational Risk (IOR) and the Center for Financial Professionals (CeFPro)
This paper presents survey results which represent comprehensive perspectives on operational risk practice, obtained from practitioners in a wide range of countries and sectors.
Is operational risk regulation forward looking and sensitive to current risks?
This paper evaluates the operational risk capital requirements of large US banks to determine whether they are forward looking, sensitive to banks’ current exposures and designed to allow for risk mitigation.
Predictive fraud analytics: B-tests
In this paper, the authors look at B-tests: methods by which it is possible to identify internal fraud among employees and partners of the bank at an early stage.
A general framework for constructing bank risk data sets
This paper proposes a general framework for constructing bank risk data sets, which provides an integrated process from data sources to comprehensive risk data sets.