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measurement
Society of Actuaries in Ireland
Ian Carey
Kate O’Reilly
4 November 2004
Background
Background
Risk Management
Risk Management
Risk Measurement
Risk Measurement
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© 2004 Towers Perrin
What is operational risk?
Basel / EU Regulators:
“The risk of direct or indirect loss resulting from inadequate or
failed internal processes, people and systems or from external
events.”
Includes….
Internal fraud
External fraud
Employment practices and workplace safety
Clients, products and business practices
Damage to physical assets
Business disruption and system failures
Execution, delivery and process management
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© 2004 Towers Perrin
Recent corporate events have led to increased scrutiny
of the management of risk
Corporate failures
‘Scandals’
Independent Barings
Mis-selling (pensions,
endowment mortgages,..)
HIH Vie d'Or
Spitzer insurance probe
Enron Equitable
AIB/BoI
DMG
Regulation Governance
Sarbanes – Oxley
Basel II
Greenbury
CAD III
Turnbull
Solvency II
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© 2004 Towers Perrin
Key drivers of implementation of operational risk
management frameworks
Compulsory
Regulation
Voluntary
Best practice
Protect company and directors
Preparing for inevitable regulation
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© 2004 Towers Perrin