Operational Risk: Measurement and Management Techniques

In the recent period, there is a dramatic change in the management approach to operational risks. Capturing past event loss is an important hurdle in the implementation phase. It is, of course, possible to use industry data for operational loss event and loss impact can be modified to fit into the size of an organisation. However, using standard industry data may not be justified because of specific inefficiency and advantages of a particular organisation as compared to the industry standard.

However, a manufacturing organisation can easily use this method to identify loss provision and risk capital need as well as impact of catastrophic loss. This is in particular applicable to after sale services and product warranty agreement and in transactions with dealers. Non-financial service industry like hotel, transportation can also apply this model.