Developing an industry op risk taxonomy: phase two

  • 28 June 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've now started a project 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 and the guidance and Deep Dives.

Stage 3: Publication

Our target is to complete and publish the enhanced reference taxonomy by early October.

Phase one reference taxonomy

Did you miss the work we did in 2018 on developing an industry reference taxonomy?

Compare your taxonomy against the ORX reference taxonomy.

ORX reference taxonomy