Managing operational risk: Moving towards the advanced measurement approach
Abstract
This paper focuses on the management of operational risk using scenario analysis, loss data, business environment internal control factors and modelling approaches to get a better understanding of the firm's forward-looking risk profile, and, via scenario analysis, the risks that pose the biggest threat to a firm's ability to meet its strategic objectives. The paper is a follow-up to a 2013 paper by McCormack and Sheen, entitled ‘Operational risk: Back on the agenda’ (Journal of Risk Management in Financial Institutions, Vol. 6, No. 4, pp. 366–386) and illustrates issues to be considered when progressing from the standardised approach to the advanced measurement approach.
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Author's Biography
Peter Mccormack is a risk and governance adviser and formerly a technical specialist, enterprise-wide risk management and corporate governance at the Bank of England’s Prudential Regulation Authority where he conducted enterprise-wide risk management reviews and board effectiveness reviews. Peter was a policy adviser on operational risk during the development of the Basel II Accord in the early part of the last decade.
Andrew Sheen is Head of Operational Risk Use Test, AMA at HSBC, and formerly manager of the risk infrastructure team in the Risk Specialists Division at the Prudential Regulation Authority. Andrew has been the UK member of the Basel Committee Standards Implementation Group for Operational Risk since 2006 and has been instrumental in assisting the committee to develop its approach to both operational risk management and the advanced measurement approach.
Philip Umande is Head of Operational Risk Modelling and Analytics at Lloyds Banking Group, and formerly a technical specialist, in operational risk in the risk infrastructure team at the Risk Specialists Division at the Prudential Regulation Authority. Philip holds a PhD in statistics and has reviewed over 30 operational risk modelling approaches including advanced modelling approach models in the UK.
Citation
Mccormack, Peter, Sheen, Andrew and Umande, Philip (2014, June 1). Managing operational risk: Moving towards the advanced measurement approach. In the Journal of Risk Management in Financial Institutions, Volume 7, Issue 3. https://doi.org/10.69554/ZMVC6295.
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