PROCESS-EVENT APPROACH FOR OPERATIONAL RISK ESTIMATION

Authors

  • Vasily Karasev Institute of Problems of Mechanical Engineering of Russian Academy of Sciences
  • Ekaterina Karaseva State University of Aerospace Instrumentation

DOI:

https://doi.org/10.17770/etr2019vol2.4041

Keywords:

process, event, logic, probability, risk, management, event chain, event flow

Abstract

Authors propose a new process-event approach for quantitative estimation of operational risk in a bank and calculation the amount of economic capital in dynamics. The proposed approach, according to the Basel II Capital Accord, belongs to the category of “advanced methods”. Operational risk is not financial risk and appeared in unfavorable events mainly. A number of business processes are performed in banking activity. Every business process contains a set of routines (operations), which can be interrupted by operational risk events with certain losses. The main idea of the approach is to describe processes as chains of casual events instead of a traditional graphic description as diagrams. Authors introduce new concepts: an elementary process event, a chain of process events, a time diagram of enterprise’s event flow, and build logical and probabilistic risk models. Methods and formulas for calculation the current and integrated operational risk in dynamics, the amount of economic capital, upper and lower limits of reservation, are given. The value of integrated operational risk can be used as a rating of the current reliability of the bank. The paper outlines the advantages and disadvantages of proposed process-event approach. Research results can be implemented as analytical tool in risk management technology, “process mining” technology and in bank intelligent management systems.

 

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Author Biography

  • Vasily Karasev, Institute of Problems of Mechanical Engineering of Russian Academy of Sciences
    Vasily Karasev was born in Leningrad, USSR and graduated from St. Petersburg State Academy of Aerospace Instruments Making in 1996, computer added design speciality. During postgraduate activity, he had prepared the dissertation work entitled “Development and research of logical and probabilistic risk models in business and methods of their identification with groups of incompatible events”. The dissertation was successfully defended in June 14, 2000. He is working now in Institute of Problems of Mechanical Engineering of Russian Academy of Sciences (IPME RAS), Intellectual Integrated Systems of Automated Design Laboratory as a senior research worker. He is Candidate in Technical Science. Research interests include logic, probability theory, combinatorial analysis, optimization methods, graph theory, classification methods, expert systems, data analysis and management technologies. He is the author of more than 60 published papers and co-author of three books.

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Published

2019-06-20

How to Cite

[1]
V. Karasev and E. Karaseva, “PROCESS-EVENT APPROACH FOR OPERATIONAL RISK ESTIMATION”, ETR, vol. 2, pp. 70–73, Jun. 2019, doi: 10.17770/etr2019vol2.4041.