Incorporating single and multiple losses in operational risk: a multi-period perspective

Kamil J. Mizgier, Maximilian Wimmer
2017 Journal of the Operational Research Society  
Operational disruptions can have serious repercussions for firms over extended periods of time. In this work, we develop a multi-period model of operational risk. We define the loss process of operational disruptions as a sum of events triggering single and multiple losses. We empirically validate our approach using an extensive data set of operational disruptions experienced by firms from the financial services and manufacturing industry sectors. The results of our simulations point out that
more » ... ns point out that operational risk is significantly underestimated if the events leading to multiple losses are not accounted for in the firms' long-term capital planning.
doi:10.1057/s41274-017-0225-4 fatcat:eeqxckhxwzfq7aq7ah3vqwq3sa