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Operational Risk [12]

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Bullet points include: Value metrics take no account of lumpiness. E.g. retail banking fraud may consist of numerous small scams. In large bank these may aggregate to (reasonably) steady flow with low variability. Although could be systemic trends, as per mortality, e.g. technological innovation by fraudsters. Lumpiness can be revealed by ratio of losses by value to losses by number. E.g. in Retail banking, Client Product and Business Services is 15% by value, just 5% by number of events. More ‘predictable’ sources in some sense akin to some types of general insurance exposures. To be expected, can buy insurance against some of these risks

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