By: Causal Capital | Martin Davies
There are stacks of operational risk reporting systems on the market however, in general many of these risk solutions are overpriced and unsophisticated programs.
So, why not build your own operational risk reporting system?
In this post we look at building a risk modelling system from the ground up and believe me, it isn’t as hard as you may think.
When a generally unscrupulous salesman approaches me to flog their risk reporting tools, I filter the men out from the boys as the saying goes with one simple question; Does your risk system model parametric perspective of loss?
If the answer is no, which is so often the case, then there is really no point talking much further. A risk reporting tool which captures loss values and other important risk metrics such as Control Self Assessment scores, will be less suited to initiatives such as Basel II unless it can generate a Value at Risk number.
In my opinion, one of the biggest hurdles holding back the operational risk discipline in general is the inability or lack of interest for modelling loss events in a coherent manner. There are many other problems businesses and risk analysts face such as: Management myopia around the importance and application of risk management from the outset, poor classing of risk events, lack of supporting event data and the list goes on. But all of this aside, if you don’t start out with an end goal in mind, then you will fail before you even kick off your risk program.
In most risk systems, even more so it seems in operational risk, specific elements are brought together to form a fully functioning risk framework. These elements operate in an integrated or converged way to paint a varied and clear perspective of potential hazard.
The presentation can be accessed at this location View Presentation