Page 27 - Azerbaijan State University of Economics

Aimene Farid, Bahi Nawel:Operational Risk Estimation Using the Value-at-Risk (VAR)
Method: Case Study of the External Bank of Algeria (EBA)

The need to provide a huge database related to all the operational events of the bank,
and this is achieved by intensifying efforts, as all business units of the bank must
create statistical tables of the events that occurred as well as determine the losses
resulting from them.

• The Bank shall have an independent operational risk management activity, which
shall be responsible for the design and implementation of the operational risk
management framework, and shall be responsible for the development of strategies
for the diagnosis, measurement, follow-up, control and mitigation of operational risks.

• The internal operational risk measurement system should be closely linked and
integrated with the Bank's day-to-day risk management processes and provide regular
reports on risk exposures.

• Clarify the reason for selecting each risk factor as one of the causes of operational
risks on the basis of experience and practice, as well as introducing the personal
judgment of those with experience in the aspects of the activities that have suffered
losses, and the risk factor must be convertible into quantitative measures as much as
possible.

• The Bank must rely in its estimates of operational risks on relevant internal and
external data and analysis of scenarios and factors that reflect the environment of
activity and internal control systems. The risk measurement system must have
credibility,transparency,good documentation and demonstrability, complemented by
consistency in application.

References
(BCBS), B. C. (2006). Basel II: International Convergence of Capital Measurement
and Capital Standards – A Revised Framework. basel switzerland: Bank for
International Settlements.
Ainura Tursunalieva, P. S. (2016). Nonparametric estimation of operational value-at-
risk (OpVaR). Insurance: Mathematics and Economics, 03. DOI:
https://doi.org/10.1016/j.insmatheco.2016.05.010
Babayev, R. (2016). “traffic growth in the context of economic . the journal of economic
sciences: theory and practice development - what traffic calming measures can be
taken?”, 75. retrieved from: 210318171139_6-Ramiz Babayev (2).pdf
Blackhurst, C. (2022, June 22). Scandals and the Evolution of Risk Management
Practices. THE NEWSTATESMAN, p. 02.
Brown, K. &. (2015). Quantitative Risk Management: Techniques and Applications.
U.K: Cambridge University Press.

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