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Structured Scenario Analysis Benchmark Reporting Portal

Join the Industry’s Leading Operational Risk Benchmarking Program.

One of the challenges of operational risk is the lack of forward-looking data to help assess a bank’s risk exposure, particularly with respect to emerging risks, and potential tail events with which most firms have not had the experience or loss data to analyze.

ABA and MSTAR, a risk mapping tool from French software provider Elseware, teamed up to launch this risk modeling project to address the deficiencies in quantification methodologies, especially for cyber risk. The portal is an alternative, forward-looking method for measuring operational risk that incorporates expert input in quantification, produces a full distribution of future loss projections to better manage and mitigate loss exposures, and it is not based on a hard to interpret “black-box” approach.

Overview

  • The project is based on the XOI (eXposure, Occurrence, Impact) approach of risk scenarios, designed by MSTAR.
  • For each considered scenario, the XOI approach analyses how future losses could occur and dependent driving factors. This is the loss generation mechanism of the scenario.
  • The objective of the project is to produce a loss generation mechanism for each of the selected scenarios, and guidelines for banks to quantify each scenario based on their current and foreseen activities and exposures.
  • The project’s goal is to facilitate peer networking and benchmarking. Pooled knowledge and an open forum for members to work through scenario development will benefit individual banks, as well as the industry.

Benefits of the SSA Framework

  • Identify major risk scenarios.
  • Structure the loss generation mechanism of each scenario.
  • Assess the factors driving the likelihood and impact of scenarios. ABA/MSTAR default assumptions are provided to facilitate assessment.
  • Measure risks in line with regulatory requirements (CCAR, Capital).
  • Final impact is measured in expected number of days of revenue lost. When appropriate, a risk insurance premium is calculated.
  • Manage risks by identifying controllable key risk indicators.

Additionally, the goal of the ABA-MSTAR SSA program is to facilitate peer networking and benchmarking: 

  • Pooled knowledge and lessons learned will benefit individual banks as well as the industry.
  • A forum will be maintained for members to serve as a challenger group in scenario development.

Risk.net’s 2020 Industry Initiative of the Year Award Winner

Read the ABA Press Release Read the Risk.net featured article

 

"The ABA/MSTAR collaboration on the Structured Scenario Analysis approach marks an important turning point for idiosyncratic operational risk quantification. First, the methodology transforms a rather complex risk quantification concept into a set of digestible risk assessment tasks then reconstructs them into a model to achieve the quantification outcome. This approach is risk sensitive and more efficient and sustainable. Second, the collaboration helped many banks from the financial industry to learn and experience first-hand a new way of risk quantification. Third, the risk quantification outcome driven by a standardized set of scenarios provided a good benchmarking opportunity for the participating banks."

Ni Kenney
Sr. Business Director, Risk Measurement and Capital Oversight
Operational Risk Management
Capital One Financial

Interested in participating in this program? Email [email protected].