Operational risk has become one of the most discussed topics in the financial industry in the recent years. The reasons for this attention can be attributed to higher investments in information systems and technology, the increasing wave of mergers and acquisitions and emergence of new financial instruments. In addition, the New Basel Capital Accord (known as Basel II) demands a capital requirement for operational risk and further motivates financial institutions to more precisely measure and manage this type of risk. The aim of this paper is to shed light on main characteristics of operational risk management and common applied methods: scenario analysis, key risk indicators, risk control self assessment and loss distribution approach.
[1] T. Arai, "Key Points of Scenario Analysis", Systems and Bank
Examination Department: Bank of Japan, 2006, available at:
http://www.boj.or.jp/en/type/release/zuiji_new/data/fsc0608be2.pdf.
[2] "BCBS: International Convergence of Capital Measurement and Capital
Standards", In Basel Committee on Banking Supervision. Press &
Communications: Bank for International Settlements, 2006, available at:
http://www.bis.org/publ/bcbs128.pdf, ISBN 92-9197-720-9.
[3] M. Bee, ÔÇ×Estimating and simulating loss distributions with incomplete
data", Oprisk and Compliance, 2006, vol. 7, no. 7, p. 38-41.
[4] Chernobal et al., "Estimation of Operational Value-at-Risk in the
Presence of Minimum Collection Thresholds", University of California,
Santa Barbara, 2005, 5, (cit. 2010-03-14), available at:
http://www.bus.qut.edu.au/paulfrijters/documents/jbf_cmrt_2006.pdf
[5] M.G. Cruz, "Modeling, Measuring and Hedging Operational Risk",
Wiley, 2002. 346 p. ISBN 978-0-471-51560-9.
[6] K. Dutta, J. Perry, "A Tale of Tails: An Empirical Analysis of Loss
Distribution Models for Estimating Operational Risk Capital", Federal
Reserve Bank of Boston: Working Paper, 2007, no. 06-13, (cit. 2010-03-
14), available at:
http://www.bos.frb.org/economic/wp/wp2006/wp0613.pdf
[7] M. Embrechts, M. Degen, D. Lambrigger, ÔÇ×The quantitative modeling of
operational risk: between g-and-h and EVT" Astin Bulletin. 2007, vol.
37, no. 2, p. 265-291, available at:
http://www.math.ethz.ch/~baltes/ftp/g-and-h_May07.pdf
[8] P. Embrechts, A. McNeil, R. Frey, "Quantitative Risk Management:
Concepts, Techniques, and Tools", Princeton University Press, 2005,
538 p, ISBN 978-0-691-12255-7.
[9] P. Embrechts, H.Furrer, R. Kaufmann, "Quantifying regulatory capital
for operational risk", Derivatives Use, Trading & Regulation, 2003, vol.
9, no. 3, p. 183-199, available at:
http://www.math.ethz.ch/~baltes/ftp/OPRiskWeb.pdf
[10] P. Embrecht, C. Kl├╝ppelberg, T. Mokosch, "Modelling Extremal Events:
for Insurance and Finance", Berlin: Springer, 1997, 655 p. ISBN
3540609318.
[11] P. Fontnouvelle, J. Jordan, E., "Implications of Alternative Operational
Risk Modeling Techniques", NBER: Working Paper Series, February
2005, no. 11103, (cit. 2010-03-11), available at:
<http://www.nber.org/papers/w11103.pdf>.
[12] P. Foutnovelle, et al., Operational Risk, "A Guide to Basel II Capital
Requirements, Models, and Analysis" Wiley, May 2007, 300 p. ISBN
0470148780.
[13] A.S. Chernobal, S.T. Rachev, F.J. Fabozzi, Operational Risk, "A Guide
to Basel II Capital Requirements, Models, and Analysis", Wiley, May
2007. 300 s. ISBN 0470148780.
[14] A.A. Jobst, Operational Risk, "The Sting is Still in the Tail but the
Poison Depends on the Dose: Working Paper", IMF: Monetary and
Capital Markets Department. 2007, no. 07/239.
[15] M. Mejstř├¡k, M. Pe─ìen├í, P. Tepl├¢, "Basic Principles of Banking.",
Prague : Karolinum, 2008, 628 p. ISBN 978-80-246-1500-4.
[16] M. Moscadelli, "The modelling of operational risk: experience with
analysis of the data, collected by the Basel Committee", Banca d-Italia:
Temi di discussion del Servizio Studi, July 2004, no. 517, (cit. 2010-03-
11), available at:
http://www.bancaditalia.it/pubblicazioni/econo/temidi/td04/td517_04/td
517/tema_517.pdf
[17] J. Neslehova, P. Embrechts, V. Chavez-Demoulin, "Infinite mean
models and the LDA for operational risk", Journal of Operational Risk,
2006, vol. 1, no. 1, p. 3-25, available at:
http://www.math.ethz.ch/~baltes/ftp/manuscript.pdf
[18] G. Peters, V. Terauds, ÔÇ×Quantifying Bank Operational Risk. 2006,
supplementary report in Assessment of strategies for evaluating extreme
risks by FRANKLIN, J. Assessment of Strategies for Evaluating
Extreme Risks", ACERA Project, no 0602, School of Mathematics and
Statistics, University of New South Wales, p. 61.
[19] M. Rippel and P. Teply,"Operational Risk - Scenario Analysis", Proc. of
2010 International Conference on Business, Economics and Tourism
Management, Paris: World Academy of Science, Engineering and
Technology, 2010, Issue 66, pp. 1283-1290, ISSN: 2070-3724.
[20] E. Rosengren, ÔÇ×Scenario analysis and the AMA. Federal Reserve Bank
of Boston", 2006 (cit. 2010-03-14), available at:
http://www.bos.frb.org/bankinfo/qau/presentations/2006/er71906.pdf
[21] P. Schevchenko, M. Wuthrich, ÔÇ×The Structural Modelling of Operational
Risk via Bayesian inference: Combining Loss Data with Expert
Opinions", Journal of Operational Risk. 2006, vol. 1, no. 3, p. 3-26,
available at:
http://www.cmis.csiro.au/pavel.shevchenko/docs/BayesianOpRisk_final.
pdf
[22] P. Teply, R. Chalupka, and J. Cernohorsky, "Operational Risk And
Economic Capital Modeling", Proc. International Conference on
Business, Economics and Tourism Management, World Academic
Press, Feb. 2010, pp. 70-75, ISBN13: 978-1-84626-026-1.
[23] P. Teply, "The Truth About The 2008-2009 Crisis: A Hard Lesson for
The Global Markets", Saarbrucken: VDM Verlag.
[24] P. Teply, "Exit Strategies from The Global Crisis", Proc. of 2010
International Conference on Business, Economics and Tourism
Management, Paris: World Academy of Science, Engineering and
Technology, 2010, Issue 66, pp. 387-392, ISSN: 2070-3724.
[25] P. Teply, "The Key Challenges of the New Bank Regulations", Proc. of
2010 International Conference on Business, Economics and Tourism
Management, Paris: World Academy of Science, Engineering and
Technology, 2010, Issue 66, pp. 383-386, ISSN: 2070-3724.
[26] Chalupka, Teply (2008): Petr Teply, Radon Chalupka: Operational Risk
and Implications for Economic Capital - A Case Study, IES FSV UK,
June 2008, working version
[1] T. Arai, "Key Points of Scenario Analysis", Systems and Bank
Examination Department: Bank of Japan, 2006, available at:
http://www.boj.or.jp/en/type/release/zuiji_new/data/fsc0608be2.pdf.
[2] "BCBS: International Convergence of Capital Measurement and Capital
Standards", In Basel Committee on Banking Supervision. Press &
Communications: Bank for International Settlements, 2006, available at:
http://www.bis.org/publ/bcbs128.pdf, ISBN 92-9197-720-9.
[3] M. Bee, ÔÇ×Estimating and simulating loss distributions with incomplete
data", Oprisk and Compliance, 2006, vol. 7, no. 7, p. 38-41.
[4] Chernobal et al., "Estimation of Operational Value-at-Risk in the
Presence of Minimum Collection Thresholds", University of California,
Santa Barbara, 2005, 5, (cit. 2010-03-14), available at:
http://www.bus.qut.edu.au/paulfrijters/documents/jbf_cmrt_2006.pdf
[5] M.G. Cruz, "Modeling, Measuring and Hedging Operational Risk",
Wiley, 2002. 346 p. ISBN 978-0-471-51560-9.
[6] K. Dutta, J. Perry, "A Tale of Tails: An Empirical Analysis of Loss
Distribution Models for Estimating Operational Risk Capital", Federal
Reserve Bank of Boston: Working Paper, 2007, no. 06-13, (cit. 2010-03-
14), available at:
http://www.bos.frb.org/economic/wp/wp2006/wp0613.pdf
[7] M. Embrechts, M. Degen, D. Lambrigger, ÔÇ×The quantitative modeling of
operational risk: between g-and-h and EVT" Astin Bulletin. 2007, vol.
37, no. 2, p. 265-291, available at:
http://www.math.ethz.ch/~baltes/ftp/g-and-h_May07.pdf
[8] P. Embrechts, A. McNeil, R. Frey, "Quantitative Risk Management:
Concepts, Techniques, and Tools", Princeton University Press, 2005,
538 p, ISBN 978-0-691-12255-7.
[9] P. Embrechts, H.Furrer, R. Kaufmann, "Quantifying regulatory capital
for operational risk", Derivatives Use, Trading & Regulation, 2003, vol.
9, no. 3, p. 183-199, available at:
http://www.math.ethz.ch/~baltes/ftp/OPRiskWeb.pdf
[10] P. Embrecht, C. Kl├╝ppelberg, T. Mokosch, "Modelling Extremal Events:
for Insurance and Finance", Berlin: Springer, 1997, 655 p. ISBN
3540609318.
[11] P. Fontnouvelle, J. Jordan, E., "Implications of Alternative Operational
Risk Modeling Techniques", NBER: Working Paper Series, February
2005, no. 11103, (cit. 2010-03-11), available at:
<http://www.nber.org/papers/w11103.pdf>.
[12] P. Foutnovelle, et al., Operational Risk, "A Guide to Basel II Capital
Requirements, Models, and Analysis" Wiley, May 2007, 300 p. ISBN
0470148780.
[13] A.S. Chernobal, S.T. Rachev, F.J. Fabozzi, Operational Risk, "A Guide
to Basel II Capital Requirements, Models, and Analysis", Wiley, May
2007. 300 s. ISBN 0470148780.
[14] A.A. Jobst, Operational Risk, "The Sting is Still in the Tail but the
Poison Depends on the Dose: Working Paper", IMF: Monetary and
Capital Markets Department. 2007, no. 07/239.
[15] M. Mejstř├¡k, M. Pe─ìen├í, P. Tepl├¢, "Basic Principles of Banking.",
Prague : Karolinum, 2008, 628 p. ISBN 978-80-246-1500-4.
[16] M. Moscadelli, "The modelling of operational risk: experience with
analysis of the data, collected by the Basel Committee", Banca d-Italia:
Temi di discussion del Servizio Studi, July 2004, no. 517, (cit. 2010-03-
11), available at:
http://www.bancaditalia.it/pubblicazioni/econo/temidi/td04/td517_04/td
517/tema_517.pdf
[17] J. Neslehova, P. Embrechts, V. Chavez-Demoulin, "Infinite mean
models and the LDA for operational risk", Journal of Operational Risk,
2006, vol. 1, no. 1, p. 3-25, available at:
http://www.math.ethz.ch/~baltes/ftp/manuscript.pdf
[18] G. Peters, V. Terauds, ÔÇ×Quantifying Bank Operational Risk. 2006,
supplementary report in Assessment of strategies for evaluating extreme
risks by FRANKLIN, J. Assessment of Strategies for Evaluating
Extreme Risks", ACERA Project, no 0602, School of Mathematics and
Statistics, University of New South Wales, p. 61.
[19] M. Rippel and P. Teply,"Operational Risk - Scenario Analysis", Proc. of
2010 International Conference on Business, Economics and Tourism
Management, Paris: World Academy of Science, Engineering and
Technology, 2010, Issue 66, pp. 1283-1290, ISSN: 2070-3724.
[20] E. Rosengren, ÔÇ×Scenario analysis and the AMA. Federal Reserve Bank
of Boston", 2006 (cit. 2010-03-14), available at:
http://www.bos.frb.org/bankinfo/qau/presentations/2006/er71906.pdf
[21] P. Schevchenko, M. Wuthrich, ÔÇ×The Structural Modelling of Operational
Risk via Bayesian inference: Combining Loss Data with Expert
Opinions", Journal of Operational Risk. 2006, vol. 1, no. 3, p. 3-26,
available at:
http://www.cmis.csiro.au/pavel.shevchenko/docs/BayesianOpRisk_final.
pdf
[22] P. Teply, R. Chalupka, and J. Cernohorsky, "Operational Risk And
Economic Capital Modeling", Proc. International Conference on
Business, Economics and Tourism Management, World Academic
Press, Feb. 2010, pp. 70-75, ISBN13: 978-1-84626-026-1.
[23] P. Teply, "The Truth About The 2008-2009 Crisis: A Hard Lesson for
The Global Markets", Saarbrucken: VDM Verlag.
[24] P. Teply, "Exit Strategies from The Global Crisis", Proc. of 2010
International Conference on Business, Economics and Tourism
Management, Paris: World Academy of Science, Engineering and
Technology, 2010, Issue 66, pp. 387-392, ISSN: 2070-3724.
[25] P. Teply, "The Key Challenges of the New Bank Regulations", Proc. of
2010 International Conference on Business, Economics and Tourism
Management, Paris: World Academy of Science, Engineering and
Technology, 2010, Issue 66, pp. 383-386, ISSN: 2070-3724.
[26] Chalupka, Teply (2008): Petr Teply, Radon Chalupka: Operational Risk
and Implications for Economic Capital - A Case Study, IES FSV UK,
June 2008, working version
@article{"International Journal of Business, Human and Social Sciences:50624", author = "Milan Rippel and Pert Teplý", title = "Overview of Operational Risk Management Methods", abstract = "Operational risk has become one of the most discussed topics in the financial industry in the recent years. The reasons for this attention can be attributed to higher investments in information systems and technology, the increasing wave of mergers and acquisitions and emergence of new financial instruments. In addition, the New Basel Capital Accord (known as Basel II) demands a capital requirement for operational risk and further motivates financial institutions to more precisely measure and manage this type of risk. The aim of this paper is to shed light on main characteristics of operational risk management and common applied methods: scenario analysis, key risk indicators, risk control self assessment and loss distribution approach.
", keywords = "Operational risk, economic capital, key risk
indicators, loss distribution approach.", volume = "6", number = "10", pages = "2509-3", }
