Source: Risk Management Association
The Risk Management Association and Risk Business have entered into an agreement with Algorithmics to develop a joint external loss event/key risk indicator initiative.
Its objective is to define and specify key risk indicators (KRIs) for major operational risks throughout financial institutions.
RMA and RiskBusiness have already developed an industry risk map that identifies the high operational risk points in a typical bank. They recently completed an online KRI library, which identifies, defines, evaluates and catalogues some 1,500 indicators.
Currently, RMA and RiskBusiness are working to deepen and broaden the library and launch a benchmarking of KRIs. This is where Algorithmics comes in. In addition to consulting with RMA staff, the company's Algo OpVantage research team will provide information about real-life operational risk scenarios that can be discussed in RMA's key risk indicator workshops.
"We welcome the Algo OpVantage team to this important industry initiative," said Charles Taylor, RMA's director of Operational Risk. "This well respected organization brings extensive consulting and operational risk experience to our benchmarking effort. Financial institutions need to determine how well KRIs work in tracking important risks so that they can more accurately determine their operational risks."
The initiative will be using actual scenarios from the Algo OpVantage FIRST (Financial Institutions Risk Scenario Trends) database. Designed to significantly enhance institution's analysis of external operational risk events and make truly informed risk-based decisions, FIRST utilizes a unique case study approach. The database contains approximately 5,000 detailed case studies and is unrivalled in its depth of analysis and coverage of the industry.
The Algo OpVantage research team is led by Penny Cagan, who has managed the FIRST database for over six years and has worked with many financial institutions to integrate the use of case studies into their operational risk management efforts.
"We are very pleased to be supporting RMA in this valuable initiative," said Penny Cagan. "Our goal is to establish a very useful resource for RMA members that demonstrates the value of operational risk case studies."