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http://ssrn.com/abstract=339300
 
 

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Operational Risk: A Practitioner's View


Paolo Vanini


Zurich Cantonal Bank; University of Basel

Silvan Ebnöther


Zurich Cantonal Bank

Pierre Antolinez-Fehr


Zurich Cantonal Bank

Alexander McNeil


ETH Zürich - Department of Mathematics

October 11, 2002

Journal of Risk, Vol. 5, No. 3, pp. 1-16, 2003

Abstract:     
The Basel Committee on Banking Supervision ("the Committee") released a consultative document that included a regulatory capital charge for operational risk. Since the release of the document, the complexity of the concept of "operational risk" has led to vigorous and recurring discussions. We show that for a production unit of a bank with well-defined workflows operational risk can be unambiguously defined and modelled. The results of this modelling exercise are relevant for the implementation of a risk management framework, and the pertinent risk factors can be identified. We emphasize that only a small share of all workflows make a significant contribution to the resulting VaR. This result is quite robust under stress testing. Since the definition and maintenance of processes is very costly, this last result is of major practical importance. Finally, the approach allows us to distinguish features of quality and risk management respectively.

Number of Pages in PDF File: 15

Keywords: Operational Risk, Risk Management, VaR

JEL Classification: C19, C69, G18, G21

Accepted Paper Series


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Date posted: November 18, 2002 ; Last revised: February 15, 2011

Suggested Citation

Vanini, Paolo and Ebnöther, Silvan and Antolinez-Fehr, Pierre and McNeil, Alexander, Operational Risk: A Practitioner's View (October 11, 2002). Journal of Risk, Vol. 5, No. 3, pp. 1-16, 2003. Available at SSRN: http://ssrn.com/abstract=339300

Contact Information

Paolo Vanini (Contact Author)
Zurich Cantonal Bank ( email )
Josefstrasse 222
CH-8005 Zurich
Switzerland
University of Basel ( email )
Petersplatz 1
Basel, CH-4003
Switzerland
Silvan Ebnöther
Zurich Cantonal Bank ( email )
Josefstrasse 222
CH-8000 Zurich
Switzerland
Pierre Antolinez-Fehr
Zurich Cantonal Bank ( email )
Neue Hard 9
Corporate Risk Control
CH-8000 Zurich
Switzerland
+41 1 275 70 17 (Phone)
+41 1 272 19 39 (Fax)
Alexander McNeil
Swiss Federal Institute of Technology Zurich - Department of Mathematics ( email )
ETH Zentrum HG-F 42.1
Raemistr. 101
CH-8092 Zurich, 8092
Switzerland
+41 1 632 61 62 (Phone)
+41 1 632 10 85 (Fax)
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