KRIs: the forgotten input

Using the forgotten input to build the next generation of op risk models


Basel II established that four inputs should be used in operational risk capital calculation: internal loss data, external loss data, scenario analysis, and business environment and internal control factors (BEICF). But most articles in the Journal of Operational Risk are about using internal data and the impact of using different distributions, parameter modelling, extreme value theory, and so on. Several articles discuss the use of external data, usually to develop methods to aggregate this