Skip to main content
Mobile
  • Finance, Accounting & Economics
  • Global Business Management
  • Management, Leadership & Organisation
  • Marketing & Sales
  • Strategy
  • Technology & Operations
HS Talks HS Talks
Subjects  
Search
  • Notifications
    Notifications

    No current notifications.

  • User
    Welcome Guest
    You have Limited Access The Business & Management Collection
    Login
    Get Assistance
    Login
    Forgot your password?
    Login via your organisation
    Login via Organisation
    Get Assistance
Finance, Accounting & Economics
Global Business Management
Management, Leadership & Organisation
Marketing & Sales
Strategy
Technology & Operations
Practice paper

Operational risk: The direct measurement of exposure and risk in bank operations

Peter Hughes
Journal of Risk Management in Financial Institutions, 1 (1), 25-43 (2007)
https://doi.org/10.69554/DIWX2750

Abstract

If risks and exposures are to be managed effectively, all affected parties must accept that the method of risk measurement produces a meaningful, relevant, consistent and comparable result. To date, banks have been unable to resolve this issue relative to operational risk, that is, the creation of a measurement tool or method that can be replicated across their businesses, and ultimately across the industry, to produce consistent and comparable measurements of operational risks and exposures. This paper discusses the implications of the current lack of a practical operational risk and exposure measurement framework and outlines one such framework. In the proposed framework, the notion of ‘risk units’ is presented, subjective judgments of risk are mapped to value-bearing and transaction-related ‘value bands’, operational processes are expanded to drill down to data and application-related risk exposures, and a methodology for calculating risk and exposure is put forth. Finally, the correlation of exposure to risk and actual operational losses are postulated with progressive and interactive modelling assumed over time to bring precision to the predictive capability of the method suggested in this paper.

Keywords: financial services; banking; risk measures; risk management; operational risk; data risk measurement; applications risk measurement; Basel II

The full article is available to subscribers to the journal.

Already a subscriber? Login or review other options.

Author's Biography

Peter Hughes is a Chartered Accountant and Managing Director of the UK risk software and consulting firm ARC Best Practices Limited. He was formerly a banker with JPMorgan Chase, where he held country and area management positions in Europe and South America, encompassing audit, operations, finance and risk management.

Citation

Hughes, Peter (2007, December 1). Operational risk: The direct measurement of exposure and risk in bank operations. In the Journal of Risk Management in Financial Institutions, Volume 1, Issue 1. https://doi.org/10.69554/DIWX2750.

Options

  • Download PDF
  • Share this page
    Share This Article
    Messaging
    • Outlook
    • Gmail
    • Yahoo!
    • WhatsApp
    Social
    • Facebook
    • X
    • LinkedIn
    • VKontakte
    Permalink
cover image, Journal of Risk Management in Financial Institutions
Journal of Risk Management in Financial Institutions
Volume 1 / Issue 1
© Henry Stewart
Publications LLP

The Business & Management Collection

  • ISSN: 2059-7177
  • Contact Us
  • Request Free Trial
  • Recommend to Your Librarian
  • Subscription Information
  • Match Content
  • Share This Collection
  • Embed Options
  • View Quick Start Guide
  • Accessibility

Categories

  • Finance, Accounting & Economics
  • Global Business Management
  • Management, Leadership & Organisation
  • Marketing & Sales
  • Strategy
  • Technology & Operations

Librarian Information

  • General Information
  • MARC Records
  • Discovery Services
  • Onsite & Offsite Access
  • Federated (Shibboleth) Access
  • Usage Statistics
  • Promotional Materials
  • Testimonials

About Us

  • About HSTalks
  • Editors
  • Contact Information
  • About the Journals

HSTalks Home

Follow Us On:

HS Talks
  • Site Requirements
  • Copyright & Permissions
  • Terms
  • Privacy
  • Sitemap
© Copyright Henry Stewart Talks Ltd

Personal Account Required

To use this function, you need to be signed in with a personal account.

If you already have a personal account, please login here.

Otherwise you may sign up now for a personal account.

HS Talks

Cookies and Privacy

We use cookies, and similar tools, to improve the way this site functions, to track browsing patterns and enable marketing. For more information read our cookie policy and privacy policy.

Cookie Settings

How Cookies Are Used

Cookies are of the following types:

  • Essential to make the site function.
  • Used to analyse and improve visitor experience.

For more information see our Cookie Policy.

Some types of cookies can be disabled by you but doing so may adversely affect functionality. Please see below:

(always on)

If you block these cookies or set alerts in your browser parts of the website will not work.

Cookies that provide enhanced functionality and personalisation. If not allowed functionality may be impaired.

Cookies that count and track visits and on website activity enabling us to organise the website to optimise the experience of users. They may be blocked without immediate adverse effect.