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Risk Mapping and Key Risk Indicators in Operational Risk Management

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  • Sergio Scandizzo

Abstract

In this article I describe a methodology for the mapping of Operational Risk with the objective of identifying the risks inherent in the different steps of a business process, selecting a set of variables providing an estimate for the likelihood and the severity of operational risk (Key Risk Indicators – KRIs) and designing the most appropriate control activities. I then present two examples of how the methodology described can be applied to map risks and of how a set of relevant KRIs can be identified in the front office of a trading business and in the back office of a lending business. Finally, I discuss how the information conveyed by the KRIs can be organised and summarised in order to provide a comprehensive look at the risk profile of the various business lines. The structured presentation of KRIs covering the business processes of a bank is what we call an Operational Risk Scorecard.

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  • Sergio Scandizzo, 2005. "Risk Mapping and Key Risk Indicators in Operational Risk Management," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 34(2), pages 231-256, July.
    • Handle: RePEc:bla:ecnote:v:34:y:2005:i:2:p:231-256
    DOI: 10.1111/j.0391-5026.2005.00150.x
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    Cited by:

    1. Reveiz, Alejandro & Carlos, Leon, 2010. "Operational Risk Management Using a Fuzzy Logic Inference System," Journal of Financial Transformation, Capco Institute, vol. 30, pages 141-153.
    2. Domenica Lavorato & Rita Lamboglia & Daniela Mancini, 2021. "La relazione tra rischio reputazionale e controllo-guida: possibili linee di ricerca," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2021(suppl. 2), pages 39-64.
    3. D Wu & D L Olson, 2010. "Enterprise risk management: coping with model risk in a large bank," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(2), pages 179-190, February.
    4. Sergio Beretta & Saverio Bozzolan, 2013. "Il governo della performance dei processi di business: dai Key Performance Indicator ai Key Risk Indicator," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2013(2), pages 9-37.
    5. Khan, Umair & Khalid, Umair & Farooq, Fatima, 2021. "Endogeneity Quagmire Empirical Evidence from Telecommunication Industry of Pakistan," Journal of Accounting and Finance in Emerging Economies, CSRC Publishing, Center for Sustainability Research and Consultancy Pakistan, vol. 7(4), pages 955-967, December.
    6. Monika Blišťanová & Michaela Tirpáková & Jozef Galanda, 2022. "Proposal of Risk Identification Methodology Using the Prompt List on the Example of an Air Carrier," Sustainability, MDPI, vol. 14(15), pages 1-20, July.
    7. Rita Lamboglia & Francesco Paolone & Daniela Mancini, 2019. "Determinants of the implementation of environmental risk indicators: Empirical evidence from the Italian manufacturing context," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(2), pages 307-316, March.

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