Operational Risk Transfer
- Topics:
- Enterprise Risk Management
- Tags:
- Firms,
- Global Treasury News,
- Management,
- Risk,
- Security,
- Strategy
- Source:
- Global Treasury News
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Overview: All corporations face risks. Until recently, risks were identified within business units. Now the trend is to analyse risks on an enterprise-wide basis. Risk transfer to the insurance sector has been widely used for many years. Even though operational risks were not always classified in this way, mechanisms to transfer certain operational risks have been in use for some time. Firms are exposed to many risks and have three basic choices: avoid certain business strategies or customers, accept and retain the risk, but use internal controls and risk capital to manage this risk, or accept the risk and transfer all or part of it to others, either within or outside the organisation. Risk measurement is critical to cost-benefit analysis of risk transfer. Although methodologies for measuring operational risk are still in their infancy and may not result in precise measurement of operational risk exposures, banks are using loss data and scenario analysis as inputs to models, to generate estimates of exposure to operational risk, with greater precision than in the past.
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Format: HTML | Date: Sep 2003 | Pages: 1
