We observe a new wave of appeal for the
quantication of operational risk. For banks,
the enhanced capital requirements inthe upcoming Basel III regime incentivizethe exploration of capital optimizationpotential through more granular and risk-sensitive measurement approaches. Oneof these opportunities is the move to (or
the renement of the existing) advancedmeasurement approach (AMA) for
operational risk. The wave of developmentof a second generation of Advanced
Measurement Approach (AMA) models
happens – despite the higher regulatoryscrutiny – to approve such models giventheir assessment of model shortcomings
in the last nancial crisis.
For insurance companies, current Solvency IIrequirements likewise trigger thedevelopment of internal operational risk
models. At rst sight, the less explicit
requirements of Solvency II regardingmethodology choice seems to be anadvantage, but the lack of insurance
Dr. Marc Ryser
industry benchmarks and regulatory rules
can cause lengthy and difcult-to-manage
approval processes.The aim of this brochure is to give anoverview of the critical steps towards thedesign, development and validation of an
internal operational risk quantication
methodology. Given our internationalexperience with numerous clients, wehave learned that most of them strivefor a light approach which combinesand integrates existing operational riskframework elements in a robust modelingframework and which doesn’t createexcessive operational burden in servicingand maintenance.
We are condent that this brochure
highlights the relevant issues and that itwill constitute a value proposition for the
development of an internal quantication
approach or at least a jump-start for athorough assessment of the respectiverisk and rewards.