Economics at your fingertips  

Operational Risk Management Using a Fuzzy Logic Inference System

Alejandro Reveiz () and Carlos León ()

Journal of Financial Transformation, 2010, vol. 30, 141-153

Abstract: Operational Risk (OR) results from endogenous and exogenous risk factors, as diverse and complex to assess as human resources and technology, which may not be properly measured using traditional quantitative approaches.

Engineering has faced the same challenges when designing practical solutions to complex multifactor and non-linear systems where human reasoning, expert knowledge, and imprecise information are valuable inputs. One of the solutions provided by engineering is a Fuzzy Logic Inference System (FLIS).

The choice of a FLIS for OR assessment results in a convenient and sound use of qualitative and quantitative inputs, capable of effectively articulating risk management’s identication, assessment, monitoring, and mitigation stages.

Different from traditional approaches, the proposed model allows for evaluating mitigation efforts ex-ante, thus avoiding concealed OR sources from system complexity build-up and optimizing risk management resources. Furthermore, because the model contrasts effective with expected OR data, it is able to constantly validate its outcome, recognize environment’s shifts, and issue warning signals.

Keywords: Operational Risk; Fuzzy Logic; Risk Management (search for similar items in EconPapers)
JEL-codes: C63 D80 G32 (search for similar items in EconPapers)
Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Operational Risk Management using a Fuzzy Logic Inference System (2009) Downloads
Working Paper: Operational Risk Management using a Fuzzy Logic Inference System (2009) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Financial Transformation is currently edited by Prof. Shahin Shojai

More articles in Journal of Financial Transformation from Capco Institute 77 Water Street, 10th Floor, New York NY 10005.
Bibliographic data for series maintained by Prof. Shahin Shojai ().

Page updated 2022-07-28
Handle: RePEc:ris:jofitr:1436