Operational Risk Mitigation: Strategies and Tools

Banks adopting advanced measurement approach have the possibility of reducing the operational risk capital requirement in presence of insurance and other risk transfer mechanisms as they demonstrate that a noticeable risk-mitigating effect is achieved and the mitigation techniques comply with specific standards. In this chapter we describe the regulatory framework of the operational risk mitigation techniques and we analyse, particularly for insurance, the main operational issues of their use as operational risk mitigants, highlighting the most relevant impacts on the banks’ operational risk management. We also describe the most widespread instruments banks may use: both traditional and innovative ones. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.