Operational Risk (OR)

The Operational Risk Working Party aims to assist actuaries and others in the modelling and management of operational risk. One of the key challenges in modelling operational risk is the modelling of dependencies between operational risks, and between operational and non-operational risks such as market, credit and insurance risk. 

Outputs:

• Pension scheme cyber risk, joint paper with the Cyber Risk Investigation Working Party, 17 November 2020 covering pension schemes exposure to this key operational risk
   
• Worth the operational risk, Actuary article, 2 September 2020, by Nicole Pang of the ORWP covering emerging trends in operational risk modelling
   
• Joining the dots between operational and non-operational risk, Actuary article, 8 July 2020 on operational risk dependencies following up the Sessional paper below
   
• Operational Risk Dependencies - paper presented at Sessional event, 20 January 2020, Edinburgh
   
• Sessional event, 6 March 2017, Edinburgh (repeat of London March 2016)
   
• Good practice guide to setting inputs for operational risk models - Paper presented at Sessional event, March 2016 which generated headlines in City AM and the Actuarial Post

Other Institute and Faculty of Actuaries (IFoA) papers and resources

• IFoA Cyber Risk Investigation Working Party have produced a number of papers on cyber risk both from the point of view of general insurers’ exposure and also wider operational risk exposure to this risk
   
• Operational Risk Modelling, presentation of the results of a KPMG Market Survey on operational risk modelling practice to the November 2018 Life Conference
   
• A review of the use of complex systems applied to risk appetite and emerging risks in ERM practice, by N. Allan, N. Cantle, P. Godfrey and Y. Yin – 2011 paper which covers Bayesian Networks and other techniques which may be used for operational risk modelling and analysis
   
• Quantifying Operational Risk in Life Insurance Companies, 2006 paper by the Life Operational Risk Working Party (which pre-dated the ORWP)
  • Presentation to the 2006 Life Conference on the paper
     
• Quantifying Operational Risk in General Insurance Companies, 2004 paper by a GIRO Working Party

Other operational risk resources

The following may be of interest to those involved in Operational Risk modelling and management:

• ORIC International – provider of external loss data for insurers and asset managers as well as thought leadership on Operational Risk issues
  • Annual Capital Benchmarking Survey Summary Report, January 2020
     
• ORX  – provider of external loss data for banks and other financial services firms, who also provide thought leadership as well as summary reports on recent loss data
   
• Basel Committee on Banking Supervision (BCBS) – Operational Risk links including their principles for the management of Operational Risk and the new Standardised Measurement Approach (SMA) for setting Operational Risk regulatory capital
   
• Note that BCBS have also issued papers on operational resilience including
  • Principles for Operational Resilience, March 2021

• Operational resilience: Impact tolerances for important business services – joint paper issued March 2021 by the Prudential Regulation Authority (PRA), the Financial Conduct Authority (FCA), and the Bank of England following their December 2019 shared policy summary and consultation papers 

• Note that the Institute and Faculty of Actuaries is not responsible for the content of third party websites.