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Guidance - January 2021

Guidance on capturing operational risk impacts due to the coronavirus pandemic

This is our latest guidance on how to capture the operational risk impacts of coronavirus (Covid-19). It has been updated following further discussions with the banking and insurance definitions working groups (DWG) and taking into account feedback from our members.

The latest version provides additional guidance on how to aggregate and link losses relating to the pandemic.

Supporting the industry through the pandemic

In recognition of the impact of coronavirus on the financial sector we've made all our resources relating to coronavirus freely available. This information would usually only be available to ORX members.


The guidance

This is the third edition of a draft guidance note for ORX members on capturing operational risk losses that relate to the 2020 coronavirus pandemic. The purpose is to ensure consistency among ORX members on capturing pandemic impacts, providing a foundation for future data sharing, and benchmarking.

ORX strongly recommends that members follow this guidance for reporting losses to ORX loss data services. At this point, the guidance will be incorporated into ORX reporting standards. The guidance applies to both banking and insurance members.

There exists a range of views in the ORX membership on capturing some aspects of the impacts of the coronavirus pandemic, reflecting variation in practice across firms and jurisdictions. This guidance represents common thinking on capturing coronavirus impacts on a consistent basis.

Where possible, ORX also intends to align with reporting guidelines on coronavirus impacts created by other industry groups. The guidance includes specific impacts to be included and excluded, categorisations, areas where refinements will be made after future discussion with the DWG, and the timeline for future updates. 

Read on for an overview of the guidance or download the pdf for the full version.

General approach

Our basic approach is for firms to ask themselves:

"Would the impact have been experienced without the pandemic?”
If the answer is “no”, then include the impact in operational risk reporting.


This approach is simple to apply and captures the range of immediate impacts and costs that firms have incurred. This will provide a good range of impacts for future pandemic analysis and scenarios.

Cost impacts that are reportable to ORX

The following costs should be included:

Impacts on operations

  • Working from home – one-off costs of additional work-at-home equipment (e.g. laptops) and services (e.g. increased VPN capacity) required specifically as a result of the pandemic. Only include equipment purchased that was essential for maintaining operations that would otherwise have been disrupted by the pandemic. Equipment that would have been purchased as part of a routine equipment upgrade planned for within one year of the pandemic start date should be excluded. The full equipment cost should be used as the loss amount.
  • Cleaning costs – cleaning costs clearly attributable to the pandemic, such as the cost of deep cleaning buildings where staff have tested positive for coronavirus should be considered as a loss, as the clean would not have been required without the pandemic.
  • Protective equipment – for example, plastic screens in branches, face masks, gloves required to maintain operations during the pandemic.
  • Building costs – immediate additional costs of building closure caused by pandemic (for example, additional security costs).
  • Cost of establishing a pandemic command centre – only include costs over and above existing business continuity planning/control spend. For example, additional costs incurred in providing food and accommodation for staff during the pandemic period are additional costs incurred because of the pandemic and would be reportable.

**For insurance members**
Claims payments on contracts with pandemic exclusions

Some insurers have come under pressure from regulators, governments and consumer groups to make claims payments on policies that have pandemic exclusions.

  • If there is a court judgement or regulatory instruction to pay out on the claim, this is reportable as an operational risk loss, as this would be an example of a retroactive change in the law.
  • If the firm decides to make an ex gratia payment or make an out-of-court settlement with a customer, the payment is only reportable if there is an underlying operational risk event (for example if the contract is defective).

This situation is continuously evolving. The ORX Insurance Definitions Working Group will monitor and issue updated guidance as necessary. The suggested Event Type categorisation for this event would be EL0403 – Product Flaws. If firms consider that the pandemic was a causal factor in the loss, this can be tagged from C3 data cycle with a pandemic flag.

Impacts on logistics

  • Costs of cancelled travel or events – losses due to cancellations caused by the pandemic are reportable, as these are incurred by the firm as a direct impact of the pandemic

Impacts on people

  • Consultants – cost of external consultants required by the pandemic
  • Special payments – for example, one time add-to-pay, or top-up for employees that are required to go to the office, but only that are directly a result of pandemic.
  • Cost of providing additional mental health support for staff – immediate costs to support staff during the pandemic crisis period would be reportable as these are a direct impact of the pandemic.

Impacts not reportable to ORX

The following costs should be excluded:

  • Fee waivers and mortgage holidays – these are considered to be a goodwill gesture to customers, with the precedent of fee waivers following storm events being considered goodwill. The costs of administering these programmes would not be reportable unless there are additional costs due to the pandemic, such as hiring external staff to process high volumes of transactions.
  • Reduced revenue – for example, if the firm will generate less revenue due to the economic downturn caused by the pandemic. This is a longer-term change in the operating environment and would represent an opportunity cost.
  • Staff wages – continuing to pay staff that are not working because the firm has made a decision to shut a branch, and staff are unable to work at home. This is not an additional cost so should not be considered a loss.
  • Sick pay and health premiums – additional sick pay costs, higher workers compensation payments or health insurance premiums. Sick pay costs would be considered a cost of doing business and therefore not reportable.

Gains from the pandemic are not reportable

The following gains should be excluded (i.e. they are outside the scope of reporting to ORX):

  • Cost savings – for example, reduced electricity bills due to headquarters building being closed. This is not in the scope of operational risk reporting as it can be considered an ‘opportunity gain’.

Categorisation of losses

Unless otherwise listed above, ORX guidance is that direct impacts should be captured using Event Type EL0501 – Natural Disasters & Other Events. The rationale for this is that there is no control failure with a pandemic event, it is similar to an ‘act of god’ like other events in EL0501.

However, the European Banking Authority (EBA) issued guidance on 21 December 2020 and indicated that the primary impacts of the pandemic should be categorised with the Basel event type ‘Business disruption and system failures’, equivalent to the ORX event type ‘Technology and infrastructure failures’.

Although the consensus view of the ORX DWG is to use the EL0501 event type, given the EBA guidance, members may wish to code direct pandemic impacts with the EL06 event type. It is important that members continue to flag these events with the IL0012 flag to enable useful analysis on overall pandemic impacts.

All direct impacts should be grouped at a group level as a single event per Business Line (see ORRS 3.2.1 Grouped Losses). If multiple countries contribute to the group impact, use the country where the corporate group is headquartered for the country. If losses impact more than one business line, these should be linked (see ORRS 3.2.2 Linked Events).

When do costs associated with the pandemic become costs of doing business?

When do costs associated with the pandemic become costs of doing business in a new operating environment, and not reportable as operational risk losses?

General principle

Costs to enable the firm to restore operations following the impact of the coronavirus pandemic are reportable as operational risk losses.*

Ongoing, expected costs required after the pandemic lockdown period to maintain operations are not reportable. For example, if these ongoing costs are incorporated as items in post-pandemic budgets in response to measures mandated by public health agencies, then they would be seen as preventative measures and therefore not reportable to ORX.

Please refer to the decision tree below to help determine if a cost is reportable or not.

*See BCBS 196, section 85 (b) “The following specific items should be included in gross loss computation…Costs incurred as a consequence of the event that should include external expenses with a direct link to the operational risk event …and costs of repair or replacement, to restore the position that was prevailing before the operational risk event.”

Download the guidance

Capturing coronavirus losses - guidance note January 2021


Disclaimer: ORX has prepared this resource with care and attention. ORX does not accept responsibility for any errors or omissions. ORX does not warrant the accuracy of the advice, statement or recommendations in this resource. ORX shall not be liable for any loss, expense, damage or claim arising from this resource. The content of this resource does not itself constitute a contractual agreement, and ORX accepts no obligation associated with this resource except as expressly agreed in writing. ©ORX 2024


John Bosnell

John Bosnell

ORX Standards Senior Manager, ORX


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