Automation and Risk

We have been a little quiet on the blogging front at Causal Capital and a lot of people have asked; where's the team, what's going on? ... but it's been a busy, crazy year of growth for the company ~ We have tippled in size in less than twelve months and sadly we have stepped back from blogging to accommodate so much change, but rest assured this is only for a while.

Hopefully, we will be able to launch back into our publishing frequency for 2020 with various exciting articles, white papers, models and who knows, a few videos thrown in for fun ... certainly a new website is in order but more on that later.

Today we are going to explore automation and it's relationship on operational risk.

Risk Aggregation White Paper

It has been a while since the Causal Capital team has published a white paper, but due to popular request, we are going to start writing these wonderful pieces of work again. All faring well, we will be publishing a White Paper each month and today we are happy to release our White Paper on Risk Aggregation.

Degenerating Bank's Risk Frameworks

It is a tragic end to the year for risk management in banking where the regulator's fascination with Risk Comparability and Risk Framework Uniformity has reduced banking risk management solutions to nothing more than Risk = BCI x ILM.

When to act on a KRI

In this short blog posting, we have shared a risk management white paper on Key Risk Indicators and when an auditor should act given a specific KRI position.

Circular 900 a right way forwards

Every once in a while, banking regulators get it right, and Bangko Sentral ng Pilipinas (BSP) has certainly done so with its Circular 900 [LINK] on operational risk.

Risk Management Puzzles

Representing Operational Risk or Enterprise Risk Management for that matter as pieces of a puzzle has always been appealing and that appeal never seems to wear thin. It certainly used to be a bit of a fascination for me but the real magic of a risk framework design doesn't come from identifying the pieces of the puzzle specifically but from interconnecting these elements in a seamless manner.

Putting the pieces of a risk framework puzzle together still seems to be a challenge for risk managers, even today.

The world has to leap for a second

It is official, the leap year is just not enough.  Analysts have known for a while but fearing the worse that the worlds rotation is slowing down, even though life is speeding up, scientists need to find a way to keep everything in sync. With all of this in mind, the time lords in charge of this planet's official time system have decided to add an extra second into the year.

This time tampering is referred to as the leap second.

This is not some tomfoolery on April the 1st, nor is it February the 30th but it is going to happen tomorrow on June 30th this year.

New Capital Calculations for Basel II Op Risk

It was to be expected that the proxy system for calculating Basel II operational risk capital was always dangerously simplified and consequently fraught with inaccuracies that would under or overestimate capital. A recent publication from the Bank for International settlements confirms what risk practitioners have feared for years and in this post, we take a look at the new recommendations that have been released from the Bank for International settlements.

Operational Risk Ten Stories

A decade ago, plus a couple of months, the banking community was thrown a new mandate from the Bank for International settlements titled Basel II. For the world of Basel this was the first time regulation had included operational risk as part of the capital regime program.

Ten years on, I have decided to take stock and pull together a presentation on what has worked for the banking community in operational risk management and what remains a stubborn challenge.

Unraveling Extreme Value Theory

An interesting request came through from one of our customers today and is worth sharing on the Causal Capital blog because a lot of risk practitioners struggle with some of the more complex areas of modelling uncertainty. This is especially the case when risk managers are attempting to assess the size of impacts from catastrophes.

The Near Miss

In section 2.17 of the ISO 31000 standard, an event without consequences but an event all the same can be classified as a "near miss", "near hit" or "close call". Yesterday morning at Barcelona airport did such an event take place?

Gigantic Catastrophes - Fukushima Daiichi

Recent investigative journalism has turned out some pretty horrifying developments and realizations at the Fukushima Daiichi Nuclear Facility ... The video from Vice is nothing less than deeply concerning.

What to do with KRIs? [Part 2]

So to follow up on Part 1 of our Key Risk Indicator network or system which can be found here [LINK], perhaps the most important consideration we should ponder on is what do we actually do with the KRI data we capture?

In reality, why bother tracking Key Risk Indicators if we aren't going to do anything with them?  Yet, so many risk managers do go through this very exercise without bringing it to full conclusion.

In this article I would like to describe at a top level what we can use our KRI data for and outline what holds us back from that objective.

What to do with KRIs? [Part 1]

Over a typical month a lot of risk practitioners in my network pose various technical questions to me. Today is no different but this month we certainly have an interesting query that goes along the following lines:

"I am creating a data model for KRIs and Op Risk Loss Events and would be curious to know how the metadata model and tables could work, how can I simulate or model Key Risk Indicators?" | US Banker

A good question without any doubt and from what I observe in general risk management practice, Key Risk Indicators are rarely modeled in coherent manner. Let's address the database design first, then we can investigate various ways in which Key Risk Indicators can be modeled. 

Comprehensive Risk Frameworks for Reputation

Reputation risk is without any doubt a major concern for different types of entities across the planet, and while risk managers recognize this fact, the methods by which many practitioners go about measuring and subsequently treating reputation risk can end up enfeebled and even missing the point.

In this blog posting, we share a complete and entire framework for Reputation Risk. 

31000 Frameworks for Scenario Analysis

This week Causal Capital will be delivering a speech on how to 'stress test' an organisation for its resilience in managing catastrophes that originate from operational risk.

An associated draft white paper for this speech describes which is really an entire framework for scenario analysis has been written and can be found here [ LINK ].

A Failure To Define - Part I

Risk managers and consultants often facilitate "risk management workshops" in an effort to capture a registry or list of threats that their businesses may face. The way these workshops are delivered can vary substantially between practitioners but all that aside, a common problem found by many risk managers is; How to propose the likelihood of occurrence for a specific incident and how to identify its unbiased impact.

Let's take a look at this.

3 in 1 risk chart

A question from a client today kind of goes like this: "Is it possible to plot three types of risk variables in one chart and if so, what kind of risk chart could we use to achieve this goal?"

This is an interesting query for sure and risk charting is an area of risk management which is fascinating but can be quite complex. There is certainly more than one answer to such a question but today we'll take a look at Polar Charts as a solution.
  

Risk Taxonomies

A recent poll on whether enterprise risk frameworks should employ a risk taxonomy or not seems to have turned out an encouraging result. Over 93% of risk practitioners voting gave a thumbs up for risk categorisation and only a handful of souls repelled the concept.

In this posting we look at four steps to bring a risk taxonomy into operation and a Dendrogram Cluster Report is demonstrated to show how risk can be prioritized within a taxonomy.

Two schools of thought for measuring op risk

I have been reading a lot of posts on many different risk forums of late and it appears that the Frequency x Magnitude argument for measuring operational risk, is a stubborn pandemic and a failing that is going to be nearly impossible to move on from.

How do we really measure operational risk?