g is this one loss in a larger disaster 15 Description of the event describing

G is this one loss in a larger disaster 15

This preview shows page 21 - 23 out of 36 pages.

Indication as to whether the loss related to a larger event (e.g. is this one loss in a larger disaster?) 15. Description of the event describing root cause(s) and failed/missing controls 16. General ledger account number to which the loss was booked 17. Person and organization to contact for follow-up Table 6: Shows which kinds of elements to collect when registering operational loss events. In addition to element 14, one must consider that, there may be events that unfold over time, and also events with multiple effects. An example of the former is an event where an employee steals several times over a period of month or years. In this case, individual losses may be discovered and written off at different times as the investigation continues. An example of the latter: an earthquake destroys buildings affecting several bank businesses. In designing an operational risk loss data collection process, a provision must be made to link these related losses together. Other issues To determine which kinds of information is required for each loss, one must also set a data collection threshold, and below this threshold no losses will be collected. This threshold can differ in every bank, because this is a matter of the banks personal view of an operational loss. Some banks see loss amounts above 10000 Euro, as an operational loss and some bank do not. So it will be likely that different thresholds will be adopted [2]. Furthermore, when registering the losses, one should consider also registering issues that are not operational losses:” near misses and opportunity cost”. Near misses and opportunity cost are normally excluded as an operational loss, unless it is recognized by GAAP. The definition of near misses and opportunities cost are written here below. Near misses: An operational risk event that could have but did not result in a loss. For example: payment system downtime out of hours. Opportunity Costs : Income that would have been earned in the absence of an operational risk event. Both are not operational losses, but it can reveal a part of the banks true operational risk, even when it didn’t occur. In the next paragraph one will read about how the operational risk loss events will be processed for further analyses, which is prerequisite for using the AMA approach. 21
Image of page 21

Subscribe to view the full document.

5.2 How to process operational losses? 5.2.1 Mapping losses to trade activity The operational losses will be mapped to certain trade activities and certain event types. Within two of the methods of the Advanced Measurement Approach, the Internal Measurement Approach and the Loss Distribution Approach, one must map these losses as detailed as possible into the trade activities. We can obtain several trade activities by subdividing the 8 business lines into several sections. Hereby, within these subdivided section, several trade activities will be grouped together.
Image of page 22
Image of page 23
  • Winter '14

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask bonus questions You can ask questions ( expire soon) You can ask questions (will expire )
Answers in as fast as 15 minutes