Operational Risk Quantification: The Advanced Measurement Approach

Operational Risk

The Advanced Measurement Approach (AMA) for calculating regulatory capital for operational risk under Basel II was always controversial among both regulators and the industry, and it remains so today. Organizations struggle with a range of issues, from a lack of robust data to the fragility of the models themselves.

Quantification remains a controversial topic within operational risk – organizations today continue to struggle with how they can best drive value from their operational risk data and modeling exercises.

This whitepaper reviews the current state-of-play around modeling operational risk for regulatory capital purposes, including issues around data collection. It explores the pros and cons to current approaches to AMA modeling for both organizations and regulators. Lastly, the paper discusses what future changes might be beneficial to the AMA model for all stakeholders.

This is the first in a series of five papers, exploring the quantification of operational risk. This paper sets the scene by introducing the Advanced Measurement Approach (AMA), as used by firms and sometimes recognized by regulators for determining regulatory capital for operational risk.



Infographic: Red Flags for Counter Terrorism Financing

Do you know who you are really doing business with?

This infographic looks at the most frequently observed indicators for transactions associated with terrorist financing.

Click here to download or view the full infographic.

red flags


CYBERSECURITY – What the board of directors need to ask

Does your board delegate responsibility for cyber security to IT?

financial_binoculars_acculus_bestThe overwhelming number of cybercrime incidents has forced boards to become more educated about the topic and ask strategic and thoughtful questions toward management and internal audit. Directors need to take an active role in the organization’s cybersecurity to face the possibility of shareholder lawsuits, and even the possibility of being removed from the board.

This report published by The Institute of Internal Auditors Research Foundation (IIARF) explains why the board should not delegate the cybersecurity topic to the IT department and provides recommendations on questions every board should ask and actions items to take.

Thomson Reuters is a Principal Partner of The Institute of Internal Auditors.

Copyright © 2014 by The Institute of Internal Auditors Research Foundation (IIARF). All rights reserved. Published by The Institute of Internal Auditors Research Foundation. 247 Maitland Avenue, Altamonte Springs, Florida 32701-4201.

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