Banking Operational Risk Loss Data Report 2020

  • 23 July 2020

Each year ORX publishes a free report which analyses key trends in the frequency and severity of operational risk loss events in our global banking loss database. Alongside this, we also produce a sister report with similar analyses on the data in our insurance database. This year’s banking report examines the last six years’ worth of data in our database – 2014 to 2019.

Part of our mission is to improve operational and non-financial risk management beyond just our membership. These free reports are just one way in which we provide vital information to op risk professionals around the globe. Explore our free resources section to see what other research, data and information you could be using. Or, for full access to our research, data and expertise, find out how your firm could become a member of ORX.

Download the report for free for the full analysis and an accompanying summary of the event frequency and total loss severity in our global banking database since 2002. Or, continue reading for our highlights and key findings.

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Annual Banking Loss Report 2020

Report highlights

Decrease in operational risk losses continues

In 2019, we collected 59,437 operational risk loss events with a value of €15.8bn from our members in 2019. Averaging only €17.8bn from 2017 to 2019, this shows a noticeable drop in operational risk losses when compared to €30.4bn between 2014 and 2016.

To some extent, the decrease in levels of loss can be attributed to the nature of operational risk events and their corresponding reporting requirements. Loss events are recorded at their first date of recognition, rather than occurrence or discovery. This means that existing losses can increase in size over time. 

81% of total gross loss from banking and trading & investment

As in last year's report, the banking and trading & investment business lines make up the vast majority of operational risk loss. In total, banking and trading & investment account for 81% of the total gross loss in the global banking database between 2014 and 2019. The average annual gross loss for banking was €13.5bn, while the average for trading & investment was €6bn.

Breakdown of banking and trading & investment business lines

A breakdown of the Banking and Trading & Investment business lines in the ORX global banking data 2014-2019

Changes in op risk losses across regions

Compared with 2018, the data in 2019 showed that gross operational risk loss increased in half of the ORX regions, while it decreased in the Americas and remained unchanged in the Asia-Pacific region. Event frequency, on the other hand, remained stable, only slightly increasing in half of the ORX regions, and marginally decreasing in the other. These differences reflect industry trends but also the composition of the ORX membership.

Frequency and severity of losses reported within each region in 2019 (compared with 2018)

Map showing the frequency and severity of losses reported within each region in 2019 (compared with 2018)

What will the impact of coronavirus be on op risk losses?

While the report shows that operational risk losses are down in 2019, what affect will coronavirus (Covid-19) have on losses in 2020 and beyond?

The coronavirus pandemic has changed the world as we know it. Financial institutions across the globe reacted swiftly and redefined their operations to ensure critical services continued. Business continuity plans were largely successful and operational risk functions have taken a much more active role than ever before in facilitating change and guiding firms through the crisis.

We've published two reports which explore the immediate impacts of the pandemic, both of which are freely available for you to download:

Coronavirus: the first lessons report
Covid Risk Review report

But, what will be the ongoing impacts be? Capturing the costs of the pandemic in a consistent way is a key issue facing the industry, with both direct and indirect operational risk impacts needing to be considered. Identifying and categorising indirect costs can be very difficult due to
wide-ranging impacts. We've worked closely with our members to produce and share guidance to support the operational risk industry in recording coronavirus-related losses.

By 2021, we will begin to have a clearer picture of how much the coronavirus crisis has cost the industry over the course of 2020, and we will be able to reflect this in next year's loss report. This will allow us to truly understand the full operational costs the industry has suffered. Until then, we must work together to manage the impacts of this crisis.

Access an extensive database of op risk losses with ORX Membership

This report gives you a glimpse of what's in the ORX global banking loss database. With ORX Membership, you can access an extensive database of losses to run reports for analysis and trends in the data. You can then use this for benchmarking, to support good decision-making and to generate and validate scenarios.

Not only do you get access to data, but ORX Membership gives you the chance to be part of a global community managing operational risk together. Our members can take part in research studies, practice benchmarks, working groups and much more.

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Read the full analysis in the free report

Annual Banking Loss Report 2020