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Case Study Operational risk

Case Study Operational risk

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Published by Hashtag Pds Jr.

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Published by: Hashtag Pds Jr. on Nov 18, 2010
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11/04/2012

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Quantifying Operational Risk InGeneral Insurance Companies
 
Introduction
Due to a number of recent business failures and the unpredictable events, Insurance companies are to improve theirapproaches to operational risk( Actuarial Approach). Operational
risk can be described as “the risk of direct or indirect loss
resulting from inadequate or failed internal processes, people and systems or external events
.
Categories of operational risk
Cause:
critical elements / internal deficiency that help the event to take place. The detrimental event
“exploits
the risk
factor”
in terms of greater frequency and/or severity.
Event (actual or potential):
is the
single detrimental occurrence 
that can resolve directly in one or more damaginghappening for the bank (later
effect” 
) and at the same time provoke subsequent single correlated events.
Effect:
is the single damaging happening coming from a detrimental occurrence (event). The effect marks every singleconsequence in a unique event time-space context; the effect amount is the incurred operational loss.
 
Causes
People
Process
Systems
External eventsEvents
Internal Fraud
External Fraud
Employment Practices andWorkplace Safety
Clients, Products & BusinessPractices
Damage to Physical Assets
Business Disruption and SystemFailures
Execution, Delivery and ProcessManagementEffects
Direct Actual Losses only
Gross Losses
Failed Recoveries
Potential Actual Losses
Indirect Losses (Reputation etc)
Near Misses
Gains
Operational risk
3

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