What can we learn from a decade of operational risk loss data?
- 1 March 2021
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Operational risk losses have decreased in both value and frequency over the last ten years recent analysis by ORX shows. In our recent study, we looked at operational risk losses submitted by financial organisations between 2010 and 2019. We looked at overall totals and trends by business line and event type to see if the data supported the hypothesis that, generally, there has been a downward trend in operational risk losses since 2010.
Analysing a decade of operational risk loss data
The analysis was carried out on the loss data in ORX’s global database. The global database contains actual operational risk losses shared by the banks that make up our membership.
Financial organisations have been sharing their losses through ORX since 2002, and the database has now grown to over 900,000 events totalling more than €600bn of loss. Once securely shared with us, the data is anonymised and quality assured. Our members can then use it with confidence for analysis, to perform benchmarking, to support capital calculations and more.
Looking at the data over a long period of time, as we did in our analysis, can also reveal the history of operational risk within the industry as a whole. It shows the large, sometimes catastrophic, events experienced by firms, while also showing where lessons have been learnt and processes, controls and operational risk management generally have been strengthened.
Data seems to show a general downward trend
Looking at the data as a whole, we can see that typical operational risk losses have been slowly decreasing in value over the past decade. They’ve also reduced in frequency since 2015. Furthermore, there is evidence of a downward trend in median annual total losses per anonymised institution. This is especially evident since 2015. Finally, we can identify a downward trend in loss amount as a proportion of income in the global dataset.
The full findings from our analysis have been written in a report which is available for all ORX members to read on the member-only website.
To get access to either the banking or insurance loss databases then you need to become a member of ORX. With ORX Membership, you’re not only able to safely and anonymously share operational risk loss data, you can also take part in research, join working groups, attend events and so much more.