Title

An analysis of operational risk events in US and European Banks 2008-2014

RIS ID

127868

Publication Details

Li, Y., Allan, N. & Evans, J. (2017). An analysis of operational risk events in US and European Banks 2008-2014. Annals of Actuarial Science, 11 (2), 315-342.

Abstract

This paper explores the characteristics of 2,141 operational risk events amongst European (EU) and US banks over the period 2008-2014. We have analysed the operational risk events using a method originating in biology for the study of interrelatedness of characteristics in a complex adaptive system. The methodology, called cladistics, provides insights into the relationships between characteristics of operational risk events in banks that is not available from the traditional statistical analysis. We have used cladistics to explore if there are consistent patterns of operational risk characteristics across banks in single and different geographic zones. One significant pattern emerged which indicates there are key, stable characteristics across both geographic zones and across banks in each zone. The results identify the characteristics that could then be managed by the banks to reduce operational risk losses. We also have analysed separately the characteristics of operational risk events for "big" banks and extreme events and these results indicate that big banks and small banks have similar key operational risk characteristics, but the characteristics of extreme operational risk events are different to those for the non-extreme events.

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Link to publisher version (DOI)

http://dx.doi.org/10.1017/S1748499517000021