AFMA Services has launched its Operational Risk Key Risk Indicator (KRI) Benchmarking Project in January 2006. Targeting both energy companies and financial institutions, this service is provided free of charge to subscribers of the SCOR (Standards for the Control of Operational Risk) service. The KRI Operational Risk Benchmarking service involves the monthly collection of a defined set of key risk indicators from participants via the SCOR website.
The collection platform used is WORMSâ¢ (Web-based Operational Risk Management System) developed by AFMA Servicesâ partner in this initiative, Protecht Advisory. Participants will have access to on-line reports which show their own KRIs scored and aggregated to risk types as well as scatter graphs of all participant responses anonymously reported to facilitate comparison of KRIs across the industry.
The AFMA Services KRI Operational Risk Benchmarking service seeks to address a number of the issues in progressing KRI utilization in financial institutions by creating an industry working group which will discuss and decide upon:
- Which indicators will be tracked for benchmarking purposes. This will encourage industry discussion and knowledge sharing over which indicators are in fact âKeyâ.
- Which risk types the KRIs will be linked to, as a way of tracking the level of that risk.
- What weighting should be given to each KRI
- What threshold levels should be set to determine whether the indicator is low, medium or high.
- Ease of reporting through the WORMS web-based platform.
David Tattam, Director of Protecht, comments that âThis initiative will provide participants with a critical insight into the issues surrounding the establishment of a meaningful set of key risk indicators. We strongly encourage all Australian Financial Market participants to register for the projectâ.