It's all in the data – consistent operational risk measurement and regulation
Journal of Financial Regulation and Compliance
ISSN: 1358-1988
Article publication date: 20 November 2007
Abstract
Purpose
Amid increased size and complexity of the banking industry, operational risk has a greater potential to occur in more harmful ways than many other sources of risk. This paper seeks to provide a succinct overview of the current regulatory framework of operational risk under the New Basel Accord with a view to inform a critical debate about the influence of data collection, loss reporting, and model specification on the consistency of risk‐sensitive capital rules.
Design/methodology/approach
The paper's approach is to investigate the regulatory implications of varying characteristics of operational risk and different methods to identify operational risk exposure.
Findings
The findings reveal that effective operational risk measurement hinges on how the reporting of operational risk losses and the model sensitivity of quantitative methods affect the generation of consistent risk estimates.
Originality/value
The presented findings offer tractable recommendations for a more coherent and consistent regulation of operational risk.
Keywords
Citation
Jobst, A.A. (2007), "It's all in the data – consistent operational risk measurement and regulation", Journal of Financial Regulation and Compliance, Vol. 15 No. 4, pp. 423-449. https://doi.org/10.1108/13581980710835272
Publisher
:Emerald Group Publishing Limited
Copyright © 2007, Emerald Group Publishing Limited