The ORX Reference Taxonomy 2019
- 13 September 2019
ORX begins next stage in reference taxonomy development
“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.”
Luke Carrivick, Head of Research and Information at ORX.
In late 2018, ORX launched its “level 1” operational risk/non-financial risk (NFR) reference taxonomy. Following this work, our members and the wider industry expressed a lot of interest in us expanding our taxonomy to go deeper into level 2 risks. We are therefore delighted to announce that we are collaborating with Oliver Wyman to create an updated industry reference taxonomy.
Building an enhanced taxonomy
Over the next few months we will develop:
- An updated industry reference taxonomy – providing an enhanced version of the ORX risk taxonomy, including level 2 risks (sub-risks contained within each L1)
- Guidance – supporting users to get the best out of the taxonomy, particularly on areas of divergence
- Deep Dives – creating Deep Dives into complex/topical areas, e.g. cyber and conduct
The enhanced taxonomy will be available to the industry to use as a reference. It will reflect the key operational risks organisations face today. We will also consider how we use the taxonomy in our existing information services, with a particular focus on supporting the active management of material risks (something that is in many cases quite difficult with the Basel Event Types).
“This is the most important structural development in operational risk management for 15 years.”
Mark Cooke, ORX Chairman and Group General Manager of HSBC, commenting on the project.
How will we do this?
Stage 1: Creation
Our first step will be to analyse the taxonomies we've received from more than 50 of our member firms, which include some of the world's leading banks and insurers. Using a variety of techniques, including advanced analytics/machine learning, we'll produce an initial level 1 and level 2 taxonomy. At this stage, we will also develop any accompanying guidance and Deep Dives.
Stage 2: Review
Once we've produced an initial draft, a group of experts from our member firms and an external consultant will review the taxonomy and recommend any further changes. They'll also look at the guidance and Deep Dives.
Stage 3: Publication
Our target is to complete and publish the enhanced reference taxonomy by early October.