Client, a leading bank, wants to rationalize their operational risk reporting by integrating internal reports with external data sources.
Difficulty in demonstrating that operational risk is being effectively managed
Operational risk has become a key area of priority for banks in recent past due to regulatory pressures. The client was facing challenges in demonstrating that they are effectively managing their operational risk.
Difficulty in integrating internal reports with external data sources
The client was also facing challenges in combining internal reports and external data sources. This was necessary to ensure that operational risk is both appropriately measured, and effectively managed.
- Stage 1: Data Sourcing
Identified the internal and external sources of data was the first critical step to solving the problem. Source digital news feed, ORX, IBM First, ABA were key sources which had to be integrated.
- Stage 2: Data Understanding and Validation
The next crucial step was to understand the data, identify the relevant fields for the client’s reporting requirements, and perform analysis. Format checks were performed, data was rolled up as required, and outlier analysis was conducted.
- Stage 3: Report Creation & Insights
The final stage was to create the required, relevant reports for the client. Outlier analysis report, event type wise report and detailed causal analysis reports were created. These were supplemented with commentary on past trends and future outlook. An automated dash-boarding capability was also developed for the benefit of the client..
Advanced statistical models were built for assessing the ‘tail’ region of operational risks more accurately. Data was collected and prepared to be fed into the operational risk modeling methodology, wherein distribution selection, exploratory data analysis, threshold selection and aggregation were conducted.
Reporting quality was enhanced through the improved automated dash-boarding capability. Our dashboard reporting helped the client integrate risk and performance metrics, to enable a broad understanding of the risk environment. Improved reporting helped in developing forward looking capabilities to provide early warnings of any potential breaches of risk limits that may exceed their risk tolerance/appetite.