Quantification of operational risk is still a topic, which has not completely been discovered. The quantification of market risk appears to be easier, since the basis data for the determination of the parameters are clear: on the one hand positions of bank and on the other hand the market prices databases are given.

Operational risk, however, has many different causes. It spreads from human errors over unauthorised activities, system errors till externally caused operational risks like terrorism or disasters like floods, fires, etc. The various types of causes, which can be statistically characterised in various ways, make the modelling phase more difficult.

Targets of quantification

The targets of quantification can be specified as follows:

  • Bank internal targets
  • Regulatory targets

The Bank internal targets may include :

  • improvement of the risk awareness in the bank
  • optimisation of the risk/return management in the bank
  • adequate risk sensitive pricing of the bank's products
  • indication of possible processes, which should be improved to achieve less operational risk exposure

In this section articles are presented as downloadables in pdf-format, helpful links will be included and books regarding quantification are included as well.