Internal Risk-Event Reporting

Cathy Hampson and Gustavo Ortega

INTRODUCTION

Risk-event data is an essential component for managing operational risk. Collection and reporting of internal risk-event data can offer valuable insights to support risk identification, assessment and measurement of operational risk. Effective risk-event analysis ensures the business fully understands the root cause of a given event to determine the most appropriate risk treatment. Very often, risk-event data forms part of the risk-monitoring process as risk-and-control indicators. Additionally, risk-event data is vital for measuring operational risk and it is typically the first of all operational risk elements to be adopted when implementing an operational risk-management programme.

In this chapter, we will discuss reasons for risk-event reporting and common methods used, and define key data elements. This chapter will also explore and provide for causal analysis and the interconnections of risk-event data with the broader operational risk framework.

WHAT IS A RISK EVENT?

Historically, the focus on risk-event data has been on the collection of losses or, in other words, errors that result in a direct economic loss to the firm. However, risk events go