7/5/2023 0 Comments Orx taxonomy![]() The desired contribution of this ORX initiative was to create a common point of reference and thereby solid ground for industry discussion about developing operational risk taxonomies with the aim of laying the foundations that will allow consistent industry sharing of insights and data over the coming years. ![]() The Basel event types provide a central point of comparison, as they are universally adopted, have longevity and provide a basis for the ways in which institutions share data and provide insights into operational risks. Constructing a mutually exclusive and collectively exhaustive taxonomy driven by data is not without its challenges, and the careful narrowing of scope and separation of risks, in partnership with industry experts, was sometimes needed. As part of this work, we look at some of the contemporary concerns that have shaped how institutions think about their risks. The resultant taxonomy is a two-layered hierarchy of risks, with sixteen risks at level 1 and sixty-one risks at level 2. Some examples include (using ORX taxonomy language, published in 2020 as an essential guide for organisations moving away from Basel taxonomy to a more modern and adequate risk categorisation. This combines both the theoretical and the practical wisdom of the crowd. In this paper, we take a data-driven approach and combine the individual active taxonomies of sixty large financial institutions (fifty-eight for construction and two for validation) to create a coherent new reference taxonomy: the ORX reference taxonomy for operational and nonfinancial risk. ![]() In doing so, they are deviating from Basel Committee on Banking Supervision event types, but without a common standard for which to aim. Indeed, this need was a driving force behind the work of the operational risk association, ORX, over the last year. This changing risk profile, combined with a recent shift of focus away from capital measurement toward risk management, means that many organizations are actively revising their operational risk taxonomies. How organizations think about this expanding portfolio of threats and manage them in a consistent way is underpinned by their risk taxonomy. Risks such as conduct, cyber and third party have risen in importance and now dominate boardroom agendas. Our Expertise Insights ORX Reference Taxonomy For Operational And Non-Financial Risk Share In 2019, Oliver Wyman collaborated with the world’s largest operational risk association, ORX, to enhance a reference risk taxonomy relevant for the changing financial services industry. There has been a substantial change in the operational risks faced by financial services firms over the last fifteen years.
0 Comments
Leave a Reply. |