Integrating operational and financial risk assessments

Silvia Figini (silvia.figini@unipv.it), Ron Kenett and Silvia Salini (silvia.salini@unimi.it)

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

Abstract: This paper proposes a novel methodology for integrating financial risk and operational risk. In order to demonstrate the approach, we use real data from a telecommunication company providing services to enterprises in di different business lines and geographical locations. For each enterprise, we have collected information about operational and financial performance. Our objective is to produce a coherent measure of risk, integrating operational losses from various types of equipment failures and financial risks derived from balance sheet information. The approach demonstrated in this case study can be generalized to general service providers who need to account for both the quality of service and the financial solvency of their customers. Addressing risks in both dimensions is critical to long term sustainability and business continuity.

Keywords: Non Linear Principal Component Analysis; Score models; Bayesian integration; Basel Committee; operational risks; Financial risks (search for similar items in EconPapers)
Date: 2010-01-26
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Related works:
Working Paper: Integrating Operational and Financial Risk Assessments (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mil:wpdepa:2010-02

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