How are you capturing and managing loss events in your organization & what are the challenges you face in this regard?

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Topic: How are you capturing and managing loss events in your organization & what are the challenges you face in this regard?

Sesikanth Date: 04-08-2011 03:25 AM

Essential component of any bank’s operational risk framework is the ability to record internal loss events as they arise, to attribute them to the various categories of operational risk, and to track them to closure according to an organization’s unique work flow. Banks need to manage loss events to better understand bank’s risk exposure; to analyze and learn about root causes and to measure risk and quantify capital. From a regulatory viewpoint, a loss database is expected to be comprehensive and contain several years’ worth of data before it can be approved for use in the risk estimation process. Basel II specifically requires a minimum of 3 years data initially and 5 years for the Advanced Measurement Approach (AMA).

Some of the common challenges observed in managing loss events are Logistical challenges involved in data capture from various departments; Attribute collected events to the various categories of operational risk; Integrating external loss events; Inability to transform loss data into a decision support system; Lack of accountability & proper action plan corresponding to each loss event.

I would be glad to know your views in this regard.

Essential component of any bank’s operational risk framework is the ability to record internal loss events as they arise, to attribute them to the various categories of operational risk, and to track them to closure according to an organization’s unique work flow. Banks need to manage loss events to better understand bank’s risk exposure; to analyze and learn about root causes and to measure risk and quantify capital. From a regulatory viewpoint, a loss database is expected to be comprehensive and contain several years’ worth of data before it can be approved for use in the risk estimation process. Basel II specifically requires a minimum of 3 years data initially and 5 years for the Advanced Measurement Approach (AMA). Some of the common challenges observed in managing loss events are Logistical challenges involved in data capture from various departments; Attribute collected events to the various categories of operational risk; Integrating external loss events; Inability to transform loss data into a decision support system; Lack of accountability & proper action plan corresponding to each loss event. I would be glad to know your views in this regard.