
Allocation of capital to operational risk according to Basel II 135
top-down and bottom-up approaches to identification of operational risk and capital
allocation.
It is unwise to enter into top-down and bottom-up arguments because in the last
analysis the background principle is the same: Whether top-down or bottom-up, the
study should have as a goal to highlight operational risk, heighten awareness of it in
the organization, and provide the funds to face op risk events. Just for the record, a
top-down approach typically starts with:
䊏 Corporate strategy
䊏 Critical risk factors, and
䊏 Enterprise-wide value-based analysis.
By contrast, bottom-up concentrates ...