Key Risk Indicators:
Risk indicators are a broad category of measures used to monitor the activities and status of the control environment. KRI is further drilled down for identification and monitoring.
KRI Type I:
KRI type I is identified by the Risk management department and is applicable to all the division of the bank.
KRI Type II:
KRI type II is identified by the Operational department.
KRI Type III:
KRI type III is process specific indicators proposed by Business. Key elements in this module are:
Identification of Key Risk and its Indicators
Establishing the thresholds for KRI
Establishing monitoring, reporting and escalation process
Advanced measurement approach modeling:
It performs operational risk capital calculations using any of the following advanced approaches which best suits the financial institution under review.
Loss Distribution Approach:
Operational risk is estimated based on the assumption that there is a fixed and stable relationship between expected losses and unexpected losses.
Scenario Analysis Approach:
Operational risk is estimated based on the impact of extreme, but plausible, events which may not have occurred previously.
Operational risk is estimated based on the pure Loss Distribution Approach (LDA) for economic and regulatory capital.