Modelling error, which is defined as the use of incorrect model assumptions or inputs in a firm's actuarial, economic or financial models was considered the most material scenario by ORIC International firms in this year's Capital Benchmarking Survey. The scenario was also considered most material in the 2019 Capital Benchmarking Survey and is followed by 'Mis-selling' and 'Cyber attack for the purposes of fraudulent activity', which were considered the second most and third most material scenarios respectively in this year's survey.
How is the graph calculated?
As part of ORIC International's annual Capital Benchmarking Survey, participating firms were asked to provide their top five operational risk scenarios by capital allocation. These responses were then mapped to ORIC's 38 benchmark scenarios which in turn were provided with a risk rating calculated as follows:
5 points - For a scenario ranked number one by capital allocation
4 points - For a scenario ranked number two by capital allocation and so on.
The graph above combines the sum of the risk ratings with the number of firms who specified the benchmark scenario within their top five by capital allocation (y-axis). Therefore, the graph suggests that the benchmark scenarios detailed towards the top right of the graph are scenarios that not only appeared most frequently in a firms' top five scenarios, but were also ranked higher in the list, i.e. most material.
Want to find out more?
Discover more key takeaways from ORIC International's 2020 Capital Benchmarking Survey in our summary report HERE.
If you'd like more information on how you can take part in next year's survey, which is open to both member and non-member participants from the insurance and investment management industries, please contact enquiries@oricinternational.com