Journal of Operational Risk

Risk.net

Fighting Covid-19 in countries and operational risk in banks: similarities in risk management processes

Thomas Kaiser

  • Fighting COVID-19 in countries and fighting OpRisk in banks have a lot of commonalities.
  • Manual, inconsistent data collection is one source of limited validity of models.
  • Risk mitigation is not only based on hard data, but suffers from biases in human decision making.
  • Taking a more holistic view and clearly defining risk strategy and appetite helps both disciplines to improve.

Banks have been building, refining and applying operational risk management (including considerations for, but so far not focusing on, pandemics) for more than 20 years. Countries have been dealing with the Covid-19 pandemic for more than a year at the time of writing. Both approaches have a lot of similarities. These encompass the full risk management process: from risk strategy and data collection to modeling and decision-making. Both disciplines could learn from each other to overcome obstacles in effectively mitigating major risks, among them future pandemics.

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