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    Measurement, Data & Capital

    Report - July 2024

    This paper offers a detailed deep dive into the risk quantification practices for four key risk types and reviews some common considerations of quantification that will drive industry trends going forward. 

    The need for robust risk quantification is more pressing than ever

    ORX studies such as the Operational Risk Horizon and Top Risk Review highlight the complexity of the operational risk landscape. Emerging risks, such as those related to climate or artificial intelligence (AI), challenge how firms approach risk management. At the same time, firms find themselves navigating an increasingly intricate risk ecosystem, engaging with numerous suppliers and other stakeholders, and managing associated risks.

    As a response to this, risk quantification was a key topic of interest nominated for further research by the Analytics Working Group (AWG) in 2024. 

     

    About this study 

    ORX chose to focus its efforts on exploring quantification practices around four key risk types that were nominated by the AWG: 

    Cyber_Cyan

    Cyber risk

     

    People_Cyan-1

    Third Party risk

     

    Weather_Cyan

    Climate risk

     

    AI Cyan (1)

    Risks associated with AI

     

    To gather findings, we were able to draw on the expertise of the AWG, the participants of which represent firms with some of the most advanced quantification approaches in the industry.

    We hosted four focus calls which enabled firms to share their quantification methodologies and discuss common challenges and best practices with peers. Findings were supplemented by a risk quantification snap survey with 16 firms sharing more details about their approaches. The report from this study is now available for all ORX members to read.

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    About the ORX Analytics Community and Working Groups

    One of the longest-running communities at ORX, the ORX Analytics Community brings together operational risk professionals from over 80 organisations who are especially interested in risk measurement topics, including modelling, capital, and stress testing.

    Alongside the wider Analytics Community, we have both a Banking Analytics Working Group and an Insurance Analytics Working Group made up of a smaller number of representatives from our member organisations who actively engage on specific topics.

    Find out more about the Analytics Community

     

    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

    Contacts:
    Steve Bishop

    Steve Bishop

    Research and Information Director, ORX

    Sarah Astill

    Sarah Astill

    Head of Risk Measurement, ORX

    Martin Monakhov

    Martin Monakhov

    Research Manager, ORX

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