The anatomy of Business Process–specific Key operational Risk Indicators

Get free weekly news by e-mailBusiness Process–specific Key operational Risk Indicators are the key to proactive operational risk management, says Jee Meng Chen, Operational Risk Management, United Overseas Bank Ltd.

Introduction
The prevailing literature on Key Risk Indicators has largely focused on what are commonly referred to as Generic Indicators, which are indices that track and measure risk items such as operational losses, policy exceptions, unresolved audit issues, etc. While generic indicators are generally acknowledged as a useful risk management tool, they offer no more than a broad coverage of operational risks. It has also been pointed out that generic indicators merely identify risk on an after-the-fact basis. The key to proactive operational risk management lies in ‘Business Process-specific Key operational Risk Indicators’ (BP KRIs), where the risk identification efforts focus on the idiosyncratic business risks of functional processes. The purpose is to identify potential high-risk hotspots and to anticipate a potential problem before it occurs. A review of contemporary literature, however, indicates limited discussion on the concepts underpinning BP KRIs. Part one of this article reviews the general applications and the fundamental concepts underpinning the development of BP KRIs.

Read part one of this article here (PDF)
Read part two of this article here (PDF)

Date: 4th April 2006 • Region: SE Asia/World Type: Article •Topic: Operational risk
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