Methods of Operational Risk Management
Basel II and various Supervisory bodies of the countries have prescribed various soundness standards for Operational Risk Management for Banks and similar Financial Institutions. To complement these standards, Basel II has given guidance to 3 broad methods of Capital calculation for Operational Risk
- Basic Indicator Approach - based on annual revenue of the Financial Institution
- Standardized Approach - based on annual revenue of each of the broad business lines of the Financial Institution
- Advanced Measurement Approaches - based on the internally developed risk measurement framework of the bank adhering to the standards prescribed (methods include IMA, LDA, Scenario-based, Scorecard etc.)
The Operational Risk Management framework should include identification, measurement, monitoring, reporting, control and mitigation frameworks for Operational Risk.
Read more about this topic: Operational Risk
Famous quotes containing the words methods of, methods, risk and/or management:
“Methods of thought which claim to give the lead to our world in the name of revolution have become, in reality, ideologies of consent and not of rebellion.”
—Albert Camus (1913–1960)
“The greatest part of our faults are more excusable than the methods that are commonly taken to conceal them.”
—François, Duc De La Rochefoucauld (1613–1680)
“It’s a funny thing, the less people have to live for, the less nerve they have to risk losing—nothing.”
—Zora Neale Hurston (1891–1960)
“This we take it is the grand characteristic of our age. By our skill in Mechanism, it has come to pass, that in the management of external things we excel all other ages; while in whatever respects the pure moral nature, in true dignity of soul and character, we are perhaps inferior to most civilised ages.”
—Thomas Carlyle (1795–1881)