Operational risk
WHAT IS THIS? Operational risks are those arising from people, processes and systems – the biggest form of exposure for many industries, but one that was neglected by financial firms until the collapse of Barings Bank in 1995. It was added to the Basel capital framework in 2004, but attempts to model operational risk were dealt a heavy blow by the huge, unforeseen losses suffered by banks in the aftermath of the financial crisis.
On the path to recovery
The New York Board of Trade was destroyed on September 11. Now, the exchange is making plans to rebuild, launching new products and generally getting on with things. Russ Banham looks at how the exchange has found a silver lining in an operational risk…
Approach with caution
Indicators of operational risk are not for the faint of heart, nor are they necessarily bearers of good news. But used properly and effectively, they can help businesses identify potential losses before they happen.
A tough nut to crack
Crafting a capital charge for operational risk has proven to be a project fraught with controversy. International regulators’ first attempt raised the industry’s hackles. David Keefe reports on recent – and further expected – compromises by the Basel…
Rules and models
The proposed operational risk charge remains one of the most contentious areas of the new Basel Accord. Carol Alexander reviews the current proposals in the context of various simple models, and argues that practical implementation will require the use…
Turning ‘risky’ confidence into risk confidence
The collapse of the World Trade Center on September 11 prompted the largest ever, single operational risk loss. Here, Roland Avery and Daniel Butler of Aon discuss the new implications for operational risk management
Regulators want active dialogue on op risk
BASEL - Active dialogue between banks and their supervisors is the key to the continued development of approaches to managing operational risk, global banking regulators said in a much-delayed paper on op risk sound practices issued in December.
The Basel II capital accord: op risk proposals in brief
This summary has been updated to include the revisions to the Basel II op risk proposals contained in the Working Paper on the Regulatory Treatment of Operational Risk issued in September, 2001 and available on the Bank for International Settlements'…
Sound practices paper gets positive response
Bankers generally responded positively to the guidance on sound practices for managing operational risk issued by global banking regulators in December.
Op risk modelling evolves
Operational risk is devilishly difficult to model, but dealers and software vendors are making headway. Automated op risk reporting, profiling and sophisticated operational value-at-risk (VAR) modelling are finally beginning to catch-on in banks.
DrKW and Raft establish new op risk management standard
Investment bank Dresdner Kleinwort Wasserstein (DrKW) and Raft International, the component-based software provider to the financial services industry, have jointly developed and deployed Radar, a near real-time global operational risk management…
Op Risk discussion document will reflect shifts in regulator thinking
BASEL - The discussion document on operational risk expected in September from global banking regulators will try to cover all the concerns raised by bankers about this controversial aspect of the Basel II banking accord, regulators said.
Basel II accord makes op risk software this year’s hot topic
The sophistication of analytical software for managing operational risk will increase dramatically over the next year. Such was the message delivered by Charles Smithson, managing partner of financial consultants Ritter Associates, to the annual risk…