134. As operational losses may induce second-round effects (i.e. reputational risk), in order to …

As operational losses may induce second-round effects (i.e. reputational risk), in order to account for such effects, the operational risk stress testing programme should be thoroughly integrated into the institution-wide stress test and should include interconnections with liquidity and own funds requirements. Institutions should analyse at least:

• a) the exposure of the institution to activities and its associated risk culture and past record of operational losses, with a focus on the level and change in losses and gross income in the past few years;
• b) the business environment, including geographical locations, in which the institution operates and macroeconomic conditions;
• c) the evolution in headcount and in balance-sheet size and complexity over the past few years, including structural changes due to corporate events such as mergers and acquisitions;
• d) changes to significant elements of the information technology infrastructure;
• e) the degree and orientation of incentivising in compensation schemes;
• f) the complexity of processes and procedures, products and information technology systems;
• g) the extent of outsourcing, with regard to the concentration risk associated with all outsourcing arrangements and external market infrastructures; and
• h) the vulnerability of modelling risk, especially in areas related to the trading of financial instruments, risk measurement and management, and capital allocation.

1. Forbhreathnú

1.1 Tagairtí

1.2 Ceanglais aitheanta

1.3 Caighdeáin ghaolmhara

2. Ceanglais aitheanta

3. Caighdeáin ghaolmhara

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