Development and application of operational risk revision criteria within the operational risk monitoring procedure at a credit Institution

Abstract

Subject. Determining the frequency of operational risk revisions is a pressing issue in operational risk management. Optimizing this process opens up additional opportunities for commercial banks to save resources. Addressing this issue requires developing a methodology and implementing an appropriate automated solution within the bank's operational risk management system.
Purpose. To propose a methodology for operational risk revision and validate it using real data.
Methodology. To achieve the stated goal, we used risk management theory and methods of classical mathematical statistics. The research was conducted using current scientific literature in the field of operational risks, including methods for their quantitative assessment.
Results. The study describes a methodology for operational risk revision based on monitoring deviations in the level of operational risk materiality, analyzes problems of the current operational risk revision process, and outlines specific regulatory features in this area. We carried out the successful validation using data from a leading commercial bank in the Russian banking sector.
Conclusions. The proposed methodology has proven its adequacy for application to commercial bank data. The implementation of an automated solution reduces the degree of involvement required from the risk manager.