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3 pages/≈825 words
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Management
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English (U.S.)
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Topic:

Measuring and Managing Operational Risk Losses

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Overview
Loss data collection is a crucial Data Element in measuring and managing operational risk losses. The Basel 8x7 Matrix, consisting of eight business units and seven event types, is the standard for classifying loss data. The other three Data Elements used in ORM and OR capital modeling are
1. External (industry) Operational Risk loss data to supplement internal loss data;
2. Scenario analysis; and
3. Business Environment and Internal Control Factors (BEICF) analysis to determine the risk in the business environment and the quality of internal controls.
An operational loss is the realization of an Operational Risk event, e.g., a $1 million loss due to an internal fraud event. Loss data collection involves measuring such losses and events across business lines over a period of years (including the most recent five (5) years). The data allows creating a model (Loss Distribution Approach) that can predict Expected loss, unexpected loss, and Stress loss over the next year, thus determining our operational risk capital charge as required by the regulators. The predictions are subject to validation by an independent review.
Details
Students will have two weeks in which to complete this assignment. Working independently, identify the correct Basel event category for each of the ten loss event examples in the separately attached handout and provide your rationale for why the category most appropriately describes the loss event. Was there a resolution to the risk event? Was there a cost, fine, or consequence to the company? Your rationale/explanation should be one paragraph in length (single-spaced) for each example.
Challenge: As best as you can, identify the business line in which each event took place, using the taxonomy of Business lines (Units of Measure).
When you are finished, please upload and submit the completed handout here by the due date listed in the schedule.
Assessment
Your work will be evaluated as follows:
- Research / Explanation: You were able to accurately slot each of the ten events into the appropriate Basel event category and provide a sound justification for your selection. You were also able to identify the business line in which each event took place.
- Writing: You were able to summarize your thoughts in a clear and concise manner that is free of grammatical and spelling errors.
Basel Event Category - 10%
Rationale - 80%
Business Line - 10%
Please write in accordance with the standards of Meets or Exceeds Expectations, if the number of words you write exceeds the number of words I require, I will make additional payment accordingly! This class is very important to me. I hope you can take it seriously and look forward to cooperating with you in the future!
If you have any questions please feel free to ask.
UPDATE from the client :
I just upload the ten loss event examples in the separately attached handout and the Event Classification, if you have any questions please feel free to ask!
NH
_Event_Classification_.pdf
ORM_-_Assignments_.docx

Other (Not Listed) Sample Content Preview:

Operational Risk Management
Author’s Name
Institutional Affiliation
Course Code and Name
Professor’s Name
Date
Operational Risk Management
1. “Climate Activists Shatter 19 Windows at HSBC HQ in London’s Canary Wharf.”
The Basel event category that matches the loss event in this scenario is the damage to physical assets. My rationale for determining the most appropriate loss event was based on the physical damages or vandalism of HSBC’s windows by climate activists from Extinction Rebellion. Although a resolution was not found, HSBC said that it welcomes dialogue on its contribution to climate but could not condone any action or vandalism that put individuals’ property at risk (Faulconbridge & White, 2021). HSBC’s consequence was repairing the vandalized windows.
2. “Company Fined $1 Million by CT Officials, License Revoked.”
In this case, the Basel event category is clients, products, and business practices. Sunwave Gas & Power engaged in improper business practices, particularly providing unlicensed activities. Despite the Public Utilities Regulatory Authority (PURA) suspending the company’s license for 5 years, it continued to offer power services in Connecticut. The resolution was to close the firm, and PURA ordered restitution for over 1,000 customers (Turmelle, 2022). Moreover, Sunwave Gas & Power was fined $1 million for operating without a valid license.
3. “Former Apple Engineer Accused of Stealing Automotive Trade Secrets Pleads Guilty.”
The correct Basel event category for the scenario at hand is internal fraud. Xiaolang Zhang, Apple’s former employee, pleaded guilty and was charged with the felony of stealing the company's trade secrets. The resolution was to arrest Zhang for downloading a 25-page document that contained the engineering schematics and prototypes of Apple’s autonomous vehicle. Zhang was charged a fine of $250,000 and 10 years in jail (Leswing, 2022).
4. “Cyberattack on Long Island Disrupts Government Agencies.”
The most appropriate Basel event category that matches the loss event is external fraud. Suffolk County officials were unable to do their jobs and offer services to citizens, such as paying traffic tickets, since their computers were infected by malware through a cyber-attack incident (Cheng, 2022). The resolution was to shut down their computer systems to preserve information. The consequence was service disruption to individuals in Suffolk County.
5. “A Female Former Banker was awarded $2.8 Million Damages After She Found a Witch’s Hat on Her Desk.”
The Basel event category matches employment practices and workplace safety. The rationale used was victimization and sex discrimination against Stacey Macken, BNP Paribas’ former employee. Specifically, Macken was shocked one morning when she reported working and found a black witch’s hat on her working desk. The resolution to the risk event was to sue the bank for discrimination. BNP Paribas is to pay Macken about $2.8 million for damages arising from sex discrimination and victimization (Jones, 2022).
6. “A French Power Distributor is Reportedly Facing ...
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