OpVar software upgrade fits Basel QIS

The software was created in April by the integration of the NetRisk RiskOps database and software with the OpVaR database and quantification methodology from PricewaterhouseCoopers, the professional services organisation. It is designed to aid corporate and business line senior management, risk managers and auditors from the financial services industry in their analysis, quantification and management of operational risk.

Currently, there are more than 20 installations of OpVar worldwide. OpVar incorporates a database of publicly disclosed operational risk losses, combined with software that allows users to analyse operational risk loss events and loss probabilities. The software provides the users with the capabilities to create a variety of different risk profiles, including operational capital-at-risk calculations.

The OpVar 4.0 database is now the largest commercially available operational risk loss database, with over 7,000 operational risk losses greater than $1 million, totalling $272 billion. The database also includes another 2,000 losses below US$1 million.

Using the software, losses can be viewed in any currency and can be adjusted for inflation, using indexes such as the US consumer price index. OpVar’s data modelling module accepts multiple curve fitting techniques, and effects of risk transfer on operational capital-at-risk via insurance are now also incorporated into the data modelling module.

The new version also maps the OpVar data to the RiskOps and OpVaR legacy causal hierarchies.

Basel II will require banks to set aside capital for operational risks when it is introduced in 2005, and OpVantage claims that OpVar will prove to be ‘indispensable’ in meeting the qualifying criteria enumerated in the recently published working paper on the regulatory treatment of operational risk to implement the advanced measurement approaches.

“As more sophisticated functionality is added to OpVar, it is clear that it will be the solution of choice for financial institutions, not only to manage economic capital but also to satisfy regulatory capital requirements,” said Daniel Mudge, president and chief executive of OpVantage. “Our team has been working diligently to map the losses in the database to the QIS loss event categories at level 2. We now not only offer the largest operational loss database, the most sophisticated and widely used operational risk software, but our data is linked directly to regulatory standards,” he added.

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