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Overview
What Is Operational Risk?
The Basel Committee of the Bank of International Settlements
defines operational risk as the risk of monetary loss resulting from inadequate
or failed internal processes, people and systems or from external events,
that is not already covered by other regulatory capital charges (e.g.
credit risk, market risk, interest rate risk).
The Basel Committee has regulated that, by 2006, all global
banks be in a position to start measuring operational risk. This presents
a significant challenge to the global financial services industry.
"An internal assessment of events based on the Basel
definitions of operational risk led to the startling discovery that this
risk costs us hundreds of millions of euros each year. It can no longer
be ignored"
Managing Director Risk - Leading European Bank
What we do in Operational Risk?
AVENUES International Inc. through it's subsidiary "OpRisk Data,
LLC" provides a full spectrum of operational risk management services. Our
experience in risk, finance and operations functions at large global financial
institutions has provided us with unparalleled insight into the practical
and theoretical aspects of operational risk data collection, management
and measurement.
Our industry experience is unparalleled. Our principals
have worked with Stock Exchanges, Back-office Infrastructure Providers
(clearing companies and trust banks), Global Banks and Brokerages, and
Asset Managers - as auditors, accountants, consultants and line managers.
Our principals also have experience in architecting, modeling and building
large-scale data warehouses, marts and libraries for the Financial Services,
Telecom, Healthcare and Retail industries.
Our
Offerings
Our solutions fall into three categories:
Software Products
- External loss Database: a relational
database and OLAP tool. Currently in excess of 4,000 events where
each event is in excess of one million US dollars. Each loss is
categorized in accordance with the Event and Effect classification
standards, prescribed by the Basel Committee.
- Internal Loss Database: An internal
loss collection tool that can be easily integrated with existing
infrastructure, modeling tools, and external or consortia databases.
- Modeling Tool: A state of the
art modeling tool, featuring:
- A three parameter curve
fitting routine based on a mixture distribution (for fat tailed
severity distributions)
- Three VaR calculation tools,
with a built in mechanism to account for insurance/risk transfers:
- Monte Carlo Simulation
- Panjer's Algorithm
- Fast Fourier Transformation
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Consulting
We
support organizations at all stages in the life cycle of operational risk
management. Our experience includes:
Data
Capture and Management |
- Designing an Organizational
Framework for Operational Risk : organizational structure,
staffing, delineation of roles and responsibilities, resource
requirements.
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Definition and Categorization
of Data : appropriate standards to apply, reasoning behind
the three most common categorization methods - event, cause
and effect.
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Identification of Indicator
Data : A comprehensive assessment of relevant indicator
data to collect and appropriate statistical analysis required.
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Training : workshops
to train staff in identifying, collecting, categorizing and
reporting relevant data. Checklist of "rules of thumb" to assist
staff in categorization.
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Self - assessment
scorecard : issues and approaches based on tested audit
principles.
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Reporting : integration
of operational risk indicators with Management Information Systems.
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| Modeling
and Capital Allocation |
- Analysis: Use of the latest
breakthroughs from Phd's that are dedicated to advancing operational
risk measurement.
- Data Cleansing: Use of a bottom-up
measurement methodology, addressing data cleansing issues such
as scale, inflation, mixing of internal and external data, insurance.
- Curve Fitting: A methodology
that includes advanced MLE and MDE distribution-fitting techniques
designed to work with a number of parametric families for frequency
and for severity. These techniques allow for fitting of data drawn
from distributions subject to different truncation levels.
- VaR Calculators: Use of advanced
Value at Risk calculators with the ability to calculate aggregate
loss distributions using different numerical methods including
Monte Carlo simulation, Panjer's recursive method and Fast Fourier
transforms.
- Capital Charge: VaR calculation
and operational risk economic capital allocation.
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| Technology
Implementation |
- External Loss Database: implementation
of our product as a software solution or ASP model.
- Internal operational risk data-warehouse
: customization and integration of our product to ensure all operational
loss data is identified and captured.
- Modeling Tool: customization
and integration of our ASP solution.
- Development of a customized
solution : implementation of a client defined solution utilizing
existing data management infrastructure.
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OutSourcing
- Identification of Opportunities:
cost and benefit analysis of operational risk mitigation potential
from OutSourcing processes to whole businesses.
- Assistance with OutSourcing:
on the scene resources with country specific knowledge and experience
dedicated to ensuring your success.
- OutSourcing of the Operational
Risk Function: infrastructure to become the Operational Risk
Department for your company with significant cost savings.
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