ORX publishes reference taxonomy for operational and non-financial risk
- 21 November 2019
ORX has just published a new reference taxonomy for operational and non-financial risk. Following on from our award-winning level 1 taxonomy, which was published in 2018, the new ORX Reference Taxonomy delves deeper into level 2 risks.
This work reflects the shift in focus of operational risk in financial services from capital measurement towards risk measurement. This was a message that ORX has consistently heard from the financial institutions we work with over the last few years. As Luke Carrivick, Head of Research and Information at ORX, explains:
“Organisations were telling us that the operational risk landscape has evolved to the point that the event-driven Basel taxonomy wasn’t fully supporting their risk management activities. For example, the event view fails to precisely capture some of the most critical current concerns such as cyber.”
We began work with the global consulting firm, Oliver Wyman, earlier this year to create a new version of our original taxonomy, which encompassed risks at both level 1 and level 2. To create the ORX Reference Taxonomy, we reviewed taxonomies submitted from more than 55 of our member firms. These were used to validate the 2018 level 1 taxonomy, derive suitable supporting level 2 risks and to develop guidance. We have then worked with a member advisory group to review, update and finalise the taxonomy.
The ORX Reference Taxonomy, with supporting guidance and deep dives, was published last week to all our member firms and has already proved to be a great success. Hamish Lock, ORX Treasurer and Vice President, Group Risk Management at Royal Bank of Canada told us:
“I’m really pleased ORX has progressed this important work to put a major flag in the ground for a ‘real world’ risk taxonomy. Whereas all organisations have their own idiosyncrasies, the fact this reference is based on industry data means it is a great platform to benchmark our own version, and to ensure better alignment across the industry when categorising the inter-connected risks we face”
The taxonomy, with a summary report, is now available to non-members of ORX here: https://managingrisktogether.orx.org/operational-risk-taxonomy/orx-reference-taxonomy-2019
Find out more
If you have a press enquiry about the ORX Reference Taxonomy, please contact Amy Lauder at [email protected].