Operational Risk Modeling in Financial Services: The Exposure, Occurrence, Impact Method (Wiley Finance) - Hardcover

Naim, Patrick; Condamin, Laurent

Hardcover

ISBN 10: 1119508509 ISBN 13: 9781119508502

Publisher: Wiley, 2019

Synopsis

Transform your approach to oprisk modelling with a proven, non-statistical methodology

Operational Risk Modeling in Financial Services provides risk professionals with a forward-looking approach to risk modelling, based on structured management judgement over obsolete statistical methods. Proven over a decade’s use in significant banks and financial services firms in Europe and the US, the Exposure, Occurrence, Impact (XOI) method of operational risk modelling played an instrumental role in reshaping their oprisk modelling approaches; in this book, the expert team that developed this methodology offers practical, in-depth guidance on XOI use and applications for a variety of major risks.

The Basel Committee has dismissed statistical approaches to risk modelling, leaving regulators and practitioners searching for the next generation of oprisk quantification. The XOI method is ideally suited to fulfil this need, as a calculated, coordinated, consistent approach designed to bridge the gap between risk quantification and risk management. This book details the XOI framework and provides essential guidance for practitioners looking to change the oprisk modelling paradigm.

• Survey the range of current practices in operational risk analysis and modelling
• Track recent regulatory trends including capital modelling, stress testing and more
• Understand the XOI oprisk modelling method, and transition away from statistical approaches

• Apply XOI to major operational risks, such as disasters, fraud, conduct, legal and cyber risk

The financial services industry is in dire need of a new standard ― a proven, transformational approach to operational risk that eliminates or mitigates the common issues with traditional approaches. Operational Risk Modeling in Financial Services provides practical, real-world guidance toward a more reliable methodology, shifting the conversation toward the future with a new kind of oprisk modelling. 

About this title

About the Author

PATRICK NAIM is the CEO of Elseware and widely recognized as an expert for operational risk modeling and quantification. Patrick has extensive experience in advising banks, insurance and energy companies for over 20 years in Continental Europe, the United Kingdom, and North America. He is also the author of Risk Quantification: Management, Diagnosis and Hedging and Bayesian Networks: a Practical Guide to Applications, both from Wiley.

LAURENT CONDAMIN, PHD, is Managing Partner and Researcher at Elseware. For the past 10 years, he has been advising the largest financial institutions. His areas of expertise are operational risk modeling, stress testing, credit rating modeling, project risk analysis, insurance coverage optimization and cost-benefit analysis.

From the Back Cover

Praise for Operational Risk Modeling in Financial Services

“Patrick Naim and Laurent Condamin articulate the most comprehensive quantitative and analytical framework that I have encountered for the identification, assessment and management of Operational Risk. I have employed it for five years and found it both usable and effective. I recommend this book as essential reading for senior risk managers.”
–C.S. Venkatakrishnan, CRO, Barclays

“I had the pleasure to work with Laurent and Patrick to implement the XOI approach across a large multinational insurer. The key benefits of the method are to provide an approach to understand, manage and quantify risks and, at the same time, to provide a robust framework for capital modeling. Thanks to this method, we have been able to demonstrate the business benefits of operational risk management. XOI is also well designed to support the Operational Resilience agenda in financial services, which is the new frontier for Op Risk Management.”
–Michael Sicsic, Head of Supervision, Financial Conduct Authority; Ex-Global Operational Risk Director, Aviva Plc

“The approach described in this book was a ‘Eureka!’ moment in my journey on operational risk. Coming from a market risk background, I had the impression that beyond the definition of operational risk, it was difficult to find a book that described a coherent framework for measuring and managing operational risk. Operational Risk Modeling in Financial Services is now filling this gap.”
–Olivier Vigneron, CRO EMEA, JPMorgan Chase & Co

“The XOI methodology provides a structured approach for the modeling of operational risk scenarios. The XOI methodology is robust, forward looking and easy to understand. This book will help you understand the XOI methodology by giving you practical guidance to show how risk managers, risk modellers and scenario owners can work together to model a range of operational risk scenarios using a consistent approach.”
–Michael Furnish, Head of Model Governance and Operational Risk, Aviva Plc

“The XOI approach is a simple framework that allows to measure operational risk by identifying and quantifying the main loss drivers per risk. This facilitates the business and management engagement as the various drivers are defined in business terms and not in risk management jargon. Further, the XOI approach can be used for risk appetite setting and monitoring. I strongly believe that the XOI approach has the potential to become an industry standard for banks and regulators.”
–Emile Dunand, ORM Scenarios & Stress Testing, Credit Suisse

From the Inside Flap

Whilst regulators are proposing to withdraw the capacity for financial institutions to assess capital using internal statistical models, Operational Risk Modeling in Financial Services offers a well-tested, new approach.

Drawing on the authors’ years of experience and lessons learned, Operational Risk Modeling in Financial Services outlines a fresh approach for the analysis and modeling of operational risks within financial institutions. The book discusses the need to measure operational risk to meet regulatory requirements, such as capital charge calculation or stress tests, as well as non-regulatory requirements including risk appetite and risk management.

The authors explain the challenges measurement presents and explore the three main tools used in operational risk analysis and modeling: RCSA, loss data models and scenario analyses. The book then details the authors’ XOI method, for Exposure, Occurrence and Impact. This method makes it possible to define the exposed resource for each of the operational risks, therefore making it possible to describe the mechanism that can generate losses. Once the mechanism is identified, it can be successfully modeled and quantified.

Edition details

• Publisher: Wiley
• Publication date: 2019
• Language: English
• ISBN 10: 1119508509
• ISBN 13: 9781119508502
• Binding: Hardcover
• Edition number: 1
• Number of pages: 320