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A pilot project for peer benchmarking of operational risk scenarios

Author

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  • Condamin, Laurent
  • Marie, Clémentine
  • Naim, Patrick

Abstract

This paper describes a pilot project for peer benchmarking of operational risk scenarios. By using a common methodology of scenario design and quantification, this project offers banks a tool for mutual comparison of risk level and risk drivers. The intent is not to replace internal methods of scenario assessment, but to supplement them with a benchmarking tool. Eight US banks participated in the pilot project. The group used the eXposure, Occurrence and Impact (XOI) methodology, which combines Bayesian networks and Monte Carlo simulation to design and assess scenarios. Results and individual drivers have been compared between peers for each scenario. In the first section of this paper, we explain the need for scenario assessment. The second section describes the XOI method in detail. The third section presents the pilot experiment and lessons learned.

Suggested Citation

  • Condamin, Laurent & Marie, Clémentine & Naim, Patrick, 2018. "A pilot project for peer benchmarking of operational risk scenarios," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 11(4), pages 381-392, September.
    • Handle: RePEc:aza:rmfi00:y:2018:v:11:i:4:p:381-392
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    More about this item

    Keywords

    operational risk scenarios; benchmarking; Bayesian networks; Monte Carlo simulation; XOI methodology; risk management;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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