By providing insight and analysis on all stages of the scenario process we can help Subscribers save time and money, and raise the standard of scenario practice. Like all aspects of our work, this service also provides a unique opportunity to collaborate, share ideas and discuss topical issues.
The role of scenarios
Scenarios are an integral part of operational risk management. Whether it is stress testing or an internal operational risk management programme, scenarios are a key factor in measuring and managing operational risk across the financial services industry.
ORX has been working with scenario experts from our Member firms for several years developing a programme that helps the industry address some of the key challenges it faces, including:
- What are the uses of scenarios?
- What level of resource is required to support scenario analysis?
- How can internal and external challenge be effectively incorporated?
- How can validation be strengthened?
- Should scenarios be shared between insurance and banking?
To support our Subscribers with these challenges we developed a programme which brings together all elements of scenario practice – from benchmarking to risk driver data and industry standard terminology.
ORX Scenarios - what is it?
The programme is continually evolving to meet the needs of our Subscribers and the demands of their internal processes. Currently it consists of five main areas:
- The scenario library – the largest database of scenarios in the financial services industry
- Scenario methodology and industry practice notes – helping subscribers stay up to date
- Risk drivers – pioneering the identification of the underlying drivers of the frequency and severity attached to each scenario and creating a framework for data to be shared
- Collaboration – an annual forum and regular working group discussions
- Scenario quantification framework – using expert judgement and loss data to benchmark internal quantification of scenarios