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Integrating operational and financial risk assessments

Author

Listed:
  • Silvia FIGINI
  • Ron S. KENETT
  • Silvia SALINI

Abstract

This paper proposes a novel methodology for integrating financial risk and operational risk. In order to demonstrate the approach, we use real data from a telecommunication company providing services to enterprises in di different business lines and geographical locations. For each enterprise, we have collected information about operational and financial performance. Our objective is to produce a coherent measure of risk, integrating operational losses from various types of equipment failures and financial risks derived from balance sheet information. The approach demonstrated in this case study can be generalized to general service providers who need to account for both the quality of service and the financial solvency of their customers. Addressing risks in both dimensions is critical to long term sustainability and business continuity.

Suggested Citation

  • Silvia FIGINI & Ron S. KENETT & Silvia SALINI, 2010. "Integrating operational and financial risk assessments," Departmental Working Papers 2010-02, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    • Handle: RePEc:mil:wpdepa:2010-02
    as

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    File URL: http://wp.demm.unimi.it/files/wp/2010/DEMM-2010_002wp.pdf
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    References listed on IDEAS

    as
    1. Saita, Francesco, 2007. "Value at Risk and Bank Capital Management," Elsevier Monographs, Elsevier, edition 1, number 9780123694669.
    2. Silvia Figini & Paolo Giudici & Pierpaolo Uberti, 2010. "A threshold based approach to merge data in financial risk management," Journal of Applied Statistics, Taylor & Francis Journals, vol. 37(11), pages 1815-1824.
    3. repec:cup:apsrev:v:98:y:2004:i:01:p:191-207_00 is not listed on IDEAS
    4. Fantazzini, Dean, 2008. "Credit Risk Management," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 12(4), pages 84-137.
    5. David J. Hand & Heikki Mannila & Padhraic Smyth, 2001. "Principles of Data Mining," MIT Press Books, The MIT Press, edition 1, volume 1, number 026208290x, December.
    6. Paul Embrechts & Sidney Resnick & Gennady Samorodnitsky, 1999. "Extreme Value Theory as a Risk Management Tool," North American Actuarial Journal, Taylor & Francis Journals, vol. 3(2), pages 30-41.
    7. Dean Fantazzini & Silvia Figini, 2009. "Random Survival Forests Models for SME Credit Risk Measurement," Methodology and Computing in Applied Probability, Springer, vol. 11(1), pages 29-45, March.
    8. P. A. Ferrari & S. Salini, 2008. "Measuring Service Quality: The Opinion of Europeans about Utilities," Working Papers 2008.36, Fondazione Eni Enrico Mattei.
    Full references (including those not matched with items on IDEAS)

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