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The Operational Risk Handbook for Financial Companies: A guide to the new world of performance-oriented operational risk by Brian Barnier

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1.9. Capital and Performance Incentives

Moving loss data analysis from a compliance to a performance basis

“I don’t want to be the ‘angel of death’,” said one risk manager. “I don’t want business leaders to only see me as ‘bad news’.”

To more easily make the shift from a compliance-oriented to a business-performance-oriented risk management approach, three enhancements to your institution’s loss database are helpful. These are not required for compliance purposes. They are used for more fully understanding the performance impact.

First, capture losses on the entire chain of events. To make this easier, each step in the unfolding event chain can carry an identifier such as xxxx.xxxx.nnnn.xxxx.xxxx where the left most numbers are the proximate ...

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