An essential component of the operational risk framework is the ability to record internal loss events as they arise, to attribute them to the various categories of operational risk, and to track them to closure according to a workflow which matches the organisation’s unique business processes.
From a regulatory viewpoint, a loss database is expected to be comprehensive and contain several years’ worth of data before it can be approved for use in the risk estimation process. Basel II specifically requires a minimum of 3 years data initially and 5 years for the Advanced Measurement Approach (AMA).
Loss Data Capture and Incident Management in Optial
The systematic capture of clean and comprehensive data on losses is one of the single most important aims of an operational risk management solution, since the variety of management information that can subsequently be produced is very significant. Capturing losses is a prerequisite to measuring them, and thus to answering management questions such as ‘Which products produce the highest number of losses?’ ‘Which processes are most error-prone?’ ‘Where do the losses fail to match the expected risk profile?’
Loss events can be added online by suitably authorised individuals or loaded automatically, for example from an external loss database or from core banking systems. Events can be either losses or gains, and where appropriate a firm can choose to capture only those over a predefined threshold, those with significant non-financial impact and those that impact security and/or safety. Equally it is important to capture loss events that relate to customer complaints as these often have a financial bearing.
Data integrity is one of the main issues confronting financial institutions today. Optial assists by providing single page creation of loss events, using context sensitive defaults, tool-tip style quick help and dynamic integration of booking to general ledger accounts to streamline the process as far as possible. Optial helps make it easier for staff to do the right thing.
Optial features of the loss database include:
- Tracking of losses and near misses
- Add Basel II categorisations, impact assessments, prioritisations and cause analysis.
- Underpinned by the workflow process for approval and tracking to closure
- Ability to load incidents either interactively online or via feeds.
- Ability to load external loss events data into the system for analysis and reporting alongside internal losses.
- Deliver internal and external loss data to risk engine for modelling and capital calculation
- Real-time and historic reporting in list, graphical or tabular format, providing summary analysis and trending.
- Access controlled secure system with respect to confidential loss data
- Multiple currencies are supported, with automatic currency translation into local and group currency equivalents.
- A loss event can be linked to risks, controls, audit findings, regulations and policies.
If you would like further information on Optial Products or services email: request@optial.com or telephone: +44 (0) 207 247 7673.