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Fraud drives frequency in operational risk losses


Banks report lowest financial losses in 2022 despite the challenging operating environment, but an increase in fraud is driving up annual loss frequency.

Global annual operational risk loss figures published by ORX have revealed that despite 2022 being a year of geopolitical and economic turbulence, as well as a time of significant digitalisation of the business, banks have reported the lowest levels of gross operational risk losses seen over recent years.

However, annual loss frequency increased in 2022, with 16,020 more loss events submitted than in the previous year. The increase in the frequency of reported events is in part down to a widespread increase in the number of external fraud events and as the impact is not seen at the gross loss level, the frequency can be attributed to an increase in low value fraud. Banks from around the world that took part in the report point to an increased use of technology to facilitate fraud, and wider economic environmental factors.

In 2022, 76,620 operational risk loss events were submitted totalling €17.8bn in gross loss. This represents an average decrease of €1.6bn per year, and a drop of €8.2bn total gross loss between 2017 and 2022. The 2017 total gross loss was €26bn.

The average size of an operational risk loss event in 2022 was €232,166. The largest annual average in the past six years was €360,718 in 2020.

Steve Bishop, ORX Research & Information Director comments:


“This year we crossed a 1 million milestone, with the ORX global banking database now holding 1,041,000 events by 105 global banking members. That’s €576.1 billion in gross loss submitted in 21 years since we’ve been running this service, and the larger and richer the dataset gets, the better it is for allowing industry-wide benchmarking, observing trends and building robust models.”
“What we have seen in 2022 is low value fraud playing a large part in those figures, with our members telling us that fraud is being made easier for criminals by new technologies. It will, therefore, be interesting to see if increased use of Generative AI and other similar emerging technologies will increase figures next year, as we see this becoming more mainstream with a potential to be misused.”


External fraud losses

In 2022, 38% of firms experienced their highest-ever number of external fraud events according to the report. North American firms in Retail Banking were most impacted, with events in this category almost doubling in 2022 compared to 2021.

Despite the high frequency in 2022 however, these losses were lower on average than previous years. The median external fraud event in 2022 was the lowest it has been in the last six years. Therefore, despite the increase in frequency, the total gross loss in 2022 was only €100m higher than the previous year.

Business Lines

The large majority of loss events from 2017 to 2022 were experienced by Retail and Commercial business lines (80%), while 6% were incurred by Trading & Investment, 10% by Corporate Items, and 4% by other business lines. The highest frequency for most business lines was due to events categorised as Execution, Delivery & Process Management with 108,486 events in total.

Overall, Retail and Commercial business lines experienced the largest proportion of total gross loss (61%) across the years 2017 to 2022, while Trading & Investment business lines incurred 19%, Corporate Items 16% and other business lines the remaining 4%.

Find out more in the Annual Loss reports: