The Basel II Accord defines operational risk as the “direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events.” Poor management of operational risk can damage the reputation and the finances of any organization.
The Basel II Accord lists several types of operational risk, including internal fraud, external fraud, business disruption and system failures. Basel II requires banks to manage operational risk as part of their overall risk management.
Intellinx reduces operational risk and enables compliance with Basel II and Solvency II. The accord breaks down operational risk loss events into seven general categories as follows.
|Loss Event-Type Category||Definition||Supported
|Internal fraud||Losses due to acts of a type intended to defraud, misappropriate property or circumvent regulations, the law or company policy, excluding diversity/ discrimination events, which involves at least one internal party||Yes*|
|External fraud||Losses due to acts of a type intended to defraud, misappropriate property or circumvent the law, by a third party||Yes*|
|Employment Practices and Workplace Safety||Losses arising from acts inconsistent with employment, health or safety laws or agreements, from payment of personal injury claims, or from diversity / discrimination events||No|
|Clients, Products & Business Practices||Losses arising from an unintentional or negligent failure to meet a professional obligation to specific clients (including fiduciary and suitability requirements), or from the nature or design of a product.||Yes*|
|Damage to Physical Assets||Losses arising from loss or damage to physical assets from natural disaster or other events.||No|
|Business disruption & system failures||Losses arising from disruption of business or system failures||Yes*|
|Execution, Delivery & Process Management||Losses from failed transaction processing or process management, from relations with trade counterparties and vendors||Yes*|
ATM/ Credit card fraud:
Breach of privacy and Misuse of confidential information: