Operational Risk Modeling - Approaches and Responses

Abstract

Risk is a situation involving the exposure of something valued to potential or actual loss. In the case of the financial industry, there are numerous types of risks that an organisation needs to be aware of in order to make sure it does not get into an unexpected crisis. Market risk, credit risk, liquidity risk and the newly recognized, operational risk are some of the types of risks that an organization has to face in the financial industry. Due to rapid technological advancements, companies are also facing the threat of cyber security risk, and, many organizations across the world have already started preparing for this risk using various approaches and responses with the help of operational risk modeling. This paper strictly focuses on Operational Risk (OR) Modeling and the various approaches and responses to operational risk.