Chapter 13: Incident Data Collection Flashcards
What is the definition of “Incident Data Collection”?
The process of gathering detailed information about incidents and events that may pose risks to the organisation.
What is the Importance of “Incident Data Collection”?
For identifying what, what does this support?
- Identifying root causes, patterns and improvng risk management
- Aids with reg compliance
What are the 4 data collection methods?
- Automated systems: Software to capture and log incidents in real time
- Manual Reporting: Staff report incidents through forms / channels
- Audits and reviews
- Using existing soucres: general ledgers, client complaints, IT logs and legal provisions to collect incident data.
When discussing loss reporting, why is “Data Beyond Regulation” important?
Why might reporting data for regs actually help the firm?
It not only meets data requirements but can also improve the profitability and internal controls.
What is the link between loss data reporting and Basel II?
Collecting and analyzing high-quality loss data improves governance and reduces capital addons under regulatory frameworks.
Is loss data a major driver of regulatory capital requirements?
If so, under which regulations?
Yes.
Under Basel regulations (AMA and SMA)
What are the BCBS data quality requirements?
How many years history period and threshold?
10 years and a 20,000 EUR threshold
Must be reviewed indepdently.
What is meant by a firms “Broader View”, when comparing Losses Vs. Incidents?
What will they track that regulators wont?
Organizations will also track “incidents” (e.g., near misses, unintentional gains, incidents
without direct financial impact), not just losses
What is the definition of a “Near miss”?
Avoided losses by luck or by accident outside of normal controls.
What type of losses do regulators focus on (Basel Committee)?
What do they ignore?
Basel Committee focuses only on directly identifiable financial losses for regulatory purposes, ignoring other operational incidents.
What is a “Direct loss”?
Give examples
An immediate financial consequence e.g. client compensation or a regulatory fine
What is meant by the “Non-financial impacts fallacy”?
What can happen if this has not been taken into account?
Non-financial impacts have real financial consequences. Failing to identify them properly leads to underestimating operational risk costs.
What is an “Indirect loss”?
Give examples
Resulting impacts that can have knock on financial loss, like loss of customers or reputational damage
When recording data, why is it important to stick to essential data fields?
To avoid over-reporting. Use drop-down menus to ensure consistency in reporting risks, causes, impacts, and controls
What is the difference between Net and Gross Losses?
Net includes reimbursements; gross is total impact
What are the thresholds in data loss reporting?
Can these be manipulated?
Vary from zero to €20,000; must be justified and not manipulated.
What are the 4 key dates when reporting an incident?
- Date of discovery (first identified)
- Date of occurrence (when it actually happened)
- Date of reporting (entered into database)
- Date of accounting (when financial impacts occur on the GL)
When should material incidents be reported (No. Days)?
What about for smaller events?
Within 2-5 days, minor incidents can be summarised periodically.
What is meant by “Grouped losses”?
Why might this be necessary?
Combine multiple events from the same failure into one loss for accurate reflection.
Should a company use potential impact, not actual losses when guaging severity?
What are severity bands?
Yes, near misses and unintentional gains should be treated like actual losses.
Use severity bands (e.g., >10k, >100k) for ease.
What are the steps in the incident data collection process?
4 Rs, 1 A (NOTE: Reporting sandwich)
- Reporting: Establish a clear and acessible reporting system.
- Recording: Use standardised forms and fields to record incidents
- Reviewing: Regularly review and validate the data collected
- Analysing: Analyze the data to find root cause and trend
- Reporting: Generate regular reports for management and rregulatory bodies.
What is meant by a boundary event?
When the risk impact materialises where?
Boundary events occur when the impact materializes in a different risk class than
the cause (e.g., a credit loss due to an operational error).
What are the types of incident data?
There are 3.
- Internal Data
- External Data
- Near miss data
What are the challenges with data collection?
There are 4.
- Under reporting: Fear of blame or repercussions limit this.
- Data Quality: Ensuring completness and accuracy.
- Integration: Combining sources can lead to inconsistency.
- Timeliness: Delays in reporting can affect accuracy and usefulness.
