ICAAP Methodology Study

Report - Oct 2019

The Internal Capital Adequacy Assessment Process (ICAAP) is an integral regulatory requirement for global financial firms. When assessing capital needs, institutions must consider the impact of economic cycles and sensitivity to other external risks and factors. While some regulatory guidance is available on ICAAP, it is often ambiguous.

The study's main focus is the range of methodologies used when quantifying operational risk capital for ICAAP. Additionally, the full report provides insights into stress testing and reverse stress testing approaches, governance and validation practices, the integration of results into business as usual (BAU) activities, and key industry challenges. 

As regulatory guidance often leaves room for interpretation, this project helped participants understand common practices in the industry, and jurisdictional differences. The report from this study is available to all ORX members.