Op risk modelling evolves

Operational risk is devilishly difficult to model, but dealers and software vendors are making headway. Automated op risk reporting, profiling and sophisticated operational value-at-risk (VAR) modelling are finally beginning to catch-on in banks.

In the past year alone there have been three high profile cases of ‘fat finger’ syndrome – that is, dealers entering into large erroneous trades. In May, 2001, a dealer at Lehman Brothers in London traded a £300 million lot instead of an intended £3 million. This precipitated a 120 point fall on the FTSE 100 index – temporarily removing about £40 billion from the value of the UK’s top