comprehensive operational risk solution for data collection, capital
calculation and reporting
GENEVA/TORONTO, Dec. 6 /CNW/ - Algorithmics Incorporated, a leader in enterprise risk management, today demonstrated for the first time its Algo OpCapital module, the latest addition to its comprehensive operational risk oversight solution, Algo OpRisk. Algo OpCapital adopts an actuarial approach, by which distributions are assumed for both the number of losses per year
(frequency) and the size of each loss (severity). The module also makes use of
Mark-to-Future simulations to produce the loss distribution, avoiding many of
the constraints typically associated with actuarial approaches to capital calculations. Specifically, almost any statistical model can be used to represent frequency and severity using simulations.
"Ongoing calculation and reporting of a firm's operational capital forms an important element of a comprehensive operational risk system, driven in part by the emphasis being placed by BIS II on transparent and ongoing operational risk management. Even so, capital calculation engines to date have been notably absent from most in-house and third-party solutions," said Michael Zerbs, VP, Research & Product Marketing, Algorithmics. "With our new Mark-to-Future-based analytics engine, Algo OpCapital, we are filling this gap and combining it with Algo OpData, the firm's data collection module, into a single, powerful operational risk architecture.
"By combining the best features of an actuarial approach with a simulation framework, our clients will realize more efficient and transparent aggregation of loss distributions, more effective use of available data and a hitherto unmatched flexibility, in terms of model selection. Since Algo OpCapital uses our standard Mark-to-Future framework and proven risk analytics components, the results will be consistent with the market and credit models at those firms using Algorithmics' other, integrated enterprise risk management solutions, such as Algo Credit, Algo ALM, Algo Limits and Algo Market," Zerbs added.
Complete Solution, Now Available
As demonstrated at the ICBI's 8th annual Risk Management conference, Algo
OpRisk serves as both a foundation for satisfying internal and regulatory
reporting requirements, as well as meeting the day-to-day business needs of a
financial institution that wishes to identify emerging operational risk
issues, before they intensify. As with the rest of the Algo OpRisk solution,
Algo OpCapital builds on the proven abilities of the Mark-to-Future framework,
and the firm's scenario-generation and simulation tools mastered by
Algorithmics over the past ten years.
Algo OpCapital comes with a number of frequency and severity distributions, including the Poisson, Binomial and Bernoulli frequency models, and Normal, Lognormal, Student t, Non-parametric and Dirac Delta severity models. Specifying a discrete distribution function, writing a short Visual Basic script or writing and compiling a C++ module are ways to easily add additional distributions.
Loss distributions encompassing multiple frequency and severity scenarios
can be obtained with the Algorithmics' simulation approach. Firm-level annual
loss statistics can be calculated and made available across the enterprise to
risk managers, senior managers and business managers. Useful examples of such
- Expected and Unexpected Loss figures
- Operational Value-at-Risk (VaR) figures
- Confidence limits for operational VaR figures
- Marginal VAR figures
- Quantile to quantile plots
- Relative amounts and various charts.