Oprisk assessment = Black swans laughing?

Oprisk assessment = Black swans laughing?

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Speaker(s): Eberhard Müller (riskmueller consulting GmbH)

Assessing operational risks in the insurance industry was not the prime task of actuaries, especially because of scarce and often biased data. Nevertheless there have been some recent efforts to add actuarial opinions to the debate including the IAA Risk Book Chapter 4 on Operational Risk and the report from the German Working Party of the ERM Committee. This presentation will discuss the results of the two papers, especially what must be fulfilled to draw conclusions from scenario based approaches. It will be highlighted that processes are key for operational risk realizations. Managing operational risks means managing the respective processes. And modelling operational risks without securing stable processes is a fruitless undertaking. Some experience from the banking side will be discussed, especially the regulatory withdrawal of the possibility to model operational risks within internal models and the return to a standard approach. But also here it is questionnable, whether the current attempt to create a loss sensible standard approach draws the right conclusions from past experience. Operational risks tend to have a different behaviour from more technical risks: what has been observed can be managed and will most probably reoccur with a lower probability while typical black swans without any prior indication, observation or scenario setting constitute the largest threats. Finally it will be discussed how quantitative and qualitative operational risk assessments might be combined to achieve meaningful results.
1riskmueller consulting

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