Validating operational risk models

CCAR requires correlating operational risk loss events to the Fed’s macroeconomic stress scenarios and projecting them over nine quarters.

The overall methodology must demonstrate reliable statistical correlations between operational loss frequency and severity curves and specific macroeconomic variables.

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- How can the outcomes of operational risk models be used within the businesses to support decisions?

Supply chains encompass the end-to-end flow of information, products, and money.

The model has been validated by independent model validation firms for several subscribing banks.

We also provide operational risk model validation services to banks.

Finalyse has supported a major regional banking group in its successful AMA preparation and can also support your organization along this journey however simple or complex your chosen approach is.

In order to establish an adequate operational risk framework, the primary issue is to find a robust risk methodology such as Value-at-Risk and be able to adapt it to the types of distributions involved in modelling extreme operational losses and provide sufficient data to feed the calculation process.The EBA is mandated to develop Binding Technical Standards (BTS), Guidelines and Reports to assess internal models with the aim of ensuring a harmonised implementation of the rules for Internal Rating Based (IRB) Approaches for credit risk, Internal Model Methods (IMM) for counterparty credit risk, Advanced Measurement Approaches (AMA) for operational risk and Internal Models Approaches (IMA) for market risk.The common denominator of this mandate is to harmonise the fundamentals of internal modeling governance related to the different types of risk.Finalyse has quantitative, analytical and implementation skills and experience to help you face these challenges.Operational risk models are unique as they are designed to assess the risk of flawed processes, IT systems, manual operations or external events.The following items are discussed:- How important is the purpose of the model and what are the potential impacts of the model architecture on final use?

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