Measuring causal influences in operational risk

ABSTRACT Event-based methodologies played an important role in capital modeling and risk measurement during the first decade of the operational risk discipline. But as the practice moves beyond these initial topics, to address business value questions such as improved risk management and control methodology, causally based analytics assume increasing importance. The author identifies issues inherent in the development of a causal taxonomy, and suggests a staged approach that firms may employ to generate useful causal content, consistent with their existing operational risk methodologies and program investments.