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Integrating Operational and Financial Risk Assessments

Author

Listed:
  • Silvia Figini

    (University of Pavia)

  • Ron Kenett

    (KPA Ltd.)

  • SILVIA SALINI

    (Department of Economics, Business and Statistics - Universiy of Milan)

Abstract

This paper proposes a novel methodology for integrating nan- cial risk and operational risk. In order to demonstrate the approach, we use real data from a telecommunication company providing services to enterprises in di erent business lines and geographical locations. For each enterprise, we have collected information about operational and nancial performance. Our objective is to produce a coherent measure of risk, integrating operational losses from various types of equipment failures and nancial risks derived from balance sheet information. The approach demonstrated in this case study can be generalized to general service providers who need to account for both the quality of service and the nancial solvency of their customers. Adressing risks in both dimensions is critical to long term sustainability and business continuity.

Suggested Citation

  • Silvia Figini & Ron Kenett & SILVIA SALINI, 2010. "Integrating Operational and Financial Risk Assessments," UNIMI - Research Papers in Economics, Business, and Statistics unimi-1099, Universitá degli Studi di Milano.
    • Handle: RePEc:bep:unimip:unimi-1099
    Note: oai:cdlib1:unimi-1099
    as

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    References listed on IDEAS

    as
    1. Saita, Francesco, 2007. "Value at Risk and Bank Capital Management," Elsevier Monographs, Elsevier, edition 1, number 9780123694669.
    2. Silvia Figini & Paolo Giudici & Pierpaolo Uberti, 2010. "A threshold based approach to merge data in financial risk management," Journal of Applied Statistics, Taylor & Francis Journals, vol. 37(11), pages 1815-1824.
    3. repec:cup:apsrev:v:98:y:2004:i:01:p:191-207_00 is not listed on IDEAS
    4. Fantazzini, Dean, 2008. "Credit Risk Management," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 12(4), pages 84-137.
    5. David J. Hand & Heikki Mannila & Padhraic Smyth, 2001. "Principles of Data Mining," MIT Press Books, The MIT Press, edition 1, volume 1, number 026208290x, April.
    6. Paul Embrechts & Sidney Resnick & Gennady Samorodnitsky, 1999. "Extreme Value Theory as a Risk Management Tool," North American Actuarial Journal, Taylor & Francis Journals, vol. 3(2), pages 30-41.
    7. Dean Fantazzini & Silvia Figini, 2009. "Random Survival Forests Models for SME Credit Risk Measurement," Methodology and Computing in Applied Probability, Springer, vol. 11(1), pages 29-45, March.
    8. P. A. Ferrari & S. Salini, 2008. "Measuring Service Quality: The Opinion of Europeans about Utilities," Working Papers 2008.36, Fondazione Eni Enrico Mattei.
    Full references (including those not matched with items on IDEAS)

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