Terrorisme

[Peter van Vliet]

David,
Would you categorize Terrorisme as Op risk ? If learned it is event risk, kinda unsure of what that means really (event risk) in relation to the main categories of risk.
Thanks again

 

[David Harper CFA FRM]

Hi Peter,

That would be a good test question, imo. As you may already know, it usually works to apply the the high level test: Operational risk is any risk that is NOT market or credit (ie, third catch-all bucket), but also excludes "business risks" (i.e., the risks that shareholders would rightly expect to incur, even pay for, as part of running a business) which include strategy, product, competition, and reputation. Terrorism would pass this test, as an op risk.

Further, in Basel II, Terrorism is explicitly named as an example of "Damage to Physical Assets," which is one of the SEVEN (Level 1) Event-type Categories, see:
http://en.wikipedia.org/wiki/Operational_risk#Basel_II_event_type_categories
From Basel, Level 3 (sub category) of Damage to Physical Assets, includes "Natural disaster losses, Human losses from external sources (terrorism, vandalism) " (Basel II, Annex 7, Detail of Loss Event Types)

In regard to "event risk," in my view (to agree with you), I have not experienced "event risk" as a specific type of risk in the operational risk typology, but rather as it's used in the ET/BL matrix, as a meta-tag to sort more specific loss types into cells, such that all "events" are operational losses. I hope that helps,

 

[Peter van Vliet]

That helps a lot!