
124 Operational Risk Control
cases outside its limits. Usually this 99% of all cases does not include outliers and
spikes, but the 1% does.
Extreme events may upset even the most carefully contracted balance sheet and
cause default. Therefore, solutions are necessary that go beyond the 99% level. These
must be proactive, and they should be designed to enhance the bank’s financial staying
power. This is precisely the advantage of Dr Hermann’s proposal.
Let’s recapitulate the message conveyed by this section. Because it is based on
expected risks, the day-to-day operational capital shown in Figure 6.2 may be taken
as a proxy of regulatory capital. Beyond ...