ABSTRACT
In this chapter, a framework of methodologies for assessing operational risks is discussed, a framework used for designing an effective and optimal operational risk management system. During the identification phase, the use of the operational risk and operations process mapping is highlighted, together with the identification of the qualitative and quantitative parameters of both operational performances and risks. Guidance on when and how to define the key performance and risk indicators is also presented. The measurement of these indicators, for the information data extraction process related to operational risk causes, events, and consequences, is illustrated. The construction of the matrices that include the operational
risk measurement values obtained from the key risk indicators (KRIs) and the loss event database associated with risk causes, events, and consequences is also defined. Based on the above information, the design of modeling and monitoring strategies for both operational risks and affected operations is duly discussed in this chapter. Correlation analysis defined from multidimensional operational risk parameters is used as one of the main techniques for implementing the modeling and monitoring framework. The chapter presents advanced ways for monitoring efficiently the operational risks as well as the affected operations. The results illustrate the mapping of the pattern or contour topography of the operational risks and operations. Moreover, the correlations between the operational risks are defined using bar chart representation and mosaic mapping. Finally, surface illustrations using three-dimensional correlation models are presented for both operational risk and affected operations. This gives an indication of what risk management teams should look for to monitor operational risks. The integration of all the above phases is used for the operational risk assessment analysis.
