The introduction of the Basel Committee’s standardised measurement approach (SMA) to operational risk is still more than three years away, but it represents a fundamental change to what is still a relatively new discipline. Deloitte, already recognised as one of the best consultancies in this particular field, is heavily focused on both the challenges and opportunities arising from the SMA.
“This shift has major implications for banks’ internal loss data, but it could also be used to derive business value and risk management insight. Investment that institutions have made in operational risk loss databases can be leveraged in the new environment. With historical data on internal losses, banks will be better positioned to capitalise on advanced capabilities like big data analytics, machine learning, correlation and root-cause analysis,” says Nitish Idnani, managing director in regulatory and operational risk at Deloitte.
Historical loss data can be used to predict future risks and help banks to identify patterns that could reduce losses in the future, he suggests. Strong risk management should be considered a source of…
