Break up big conduct risk losses to aid modelling, say quants

New approach delivers stable measure of conduct risk VAR, says senior op risk quant


Back when regulators drew up a taxonomy for categorising operational risk losses some two decades ago, things seemed simple: loss events were ascribed to one of seven categories based on a set of shared characteristics, allowing banks to map them to their own risk framework and measure their incidence accordingly.

Twenty years and the better part of a trillion dollars’ worth of misconduct-related losses later, things look a little different.

Banks’ post-crisis operational loss histories have

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