ORIC International Capital Benchmarking Event Review
Updated: Feb 10, 2020
On Thursday 30 January, ORIC International hosted their second annual Capital Benchmarking Event to celebrate the launch of the 2020 Capital Benchmarking Survey. The event welcomed a range of speakers from the ORIC International consortium as well as several external subject matter experts from Oliver Wyman and risk management experts, Elseware.
The first half of the event was presented by ORIC International’s Internal Model Working Group chair, Adrian Whitaker of Aviva and ORIC’s very own Ciaran Hosty. Adrian and Ciaran described the top 10 takeaways from this year’s survey (download available below), and some of the highlights include:
The average post-diversification operational risk SCR against total SCR for participating firms was 6.45%, with 74% of participating firms reporting a number between 2 and 8%.
Modelling error continues to be the most material scenario considered by firms and includes the use of incorrect model assumptions or inputs in a firm’s actuarial, economic or financial models.
Insurance recoveries is an increasing area of focus for firms with 11 firms now considering insurance recoveries as a risk mitigation factor (up from 6 in 2019).
Following the implementation of SMCR, our survey finds that only 29% of firms have undertaken specific board training relating to operational risk capital over the last 12 months and only 52% of firms have allocated operational risk scenarios to executive owners.
Matthew Wilmot from Flood Re then described a practical application of ORIC International’s many data resources, the scenario assessment database. Matthew described how Flood Re had used consortium provided scenarios to identify appropriate scenario coverage internally and how the scenario capital assessments were used to justify internal capital allocation.
Following a short tea and coffee interval, Sean McGuire and Valerie Wong from Oliver Wyman described the move towards “real-time” operational risk measurement. Using a “Greenfield” digital bank as a case study, Sean and Valerie described how control automation could allow for actions to be defined in the event of a breach as well as the benefits and challenges that comes with “real-time” operational risk measurement.
Patrick Naim, CEO at Elseware, concluded the session by offering an insight into the future of operational risk modelling and, structured scenario assessment. Patrick described previous projects conducted with the American Bankers Association as well as the planned pilot project with ORIC International members on cyber risk scenarios. If any firms are interested in being part of this pilot project, please contact Chris Watson.
We’d like to thank everyone who either attended the session in person or dialled in and we hope you found the content useful. A copy of the summary report can be downloaded HERE