The Basel event types provide a central point of comparison, as they are universally adopted, have longevity and provide a basis for the ways in which institutions share data and provide insights into operational risks. Constructing a mutually exclusive and collectively exhaustive taxonomy driven by data is not without its challenges, and the careful narrowing of scope and separation of risks, in partnership with industry experts, was sometimes needed. As part of this work, we look at some of the contemporary concerns that have shaped how institutions think about their risks. The resultant taxonomy is a two-layered hierarchy of risks, with sixteen risks at level 1 and sixty-one risks at level 2. This combines both the theoretical and the practical wisdom of the crowd. In this paper, we take a data-driven approach and combine the individual active taxonomies of sixty large financial institutions (fifty-eight for construction and two for validation) to create a coherent new reference taxonomy: the ORX reference taxonomy for operational and non-financial risk. In doing so, they are deviating from Basel Committee on Banking Supervision event types, but without a common standard for which to aim. This changing risk profile, combined with a recent shift of focus away from capital measurement toward risk management, means that many organizations are actively revising their operational risk taxonomies. ![]() How organizations think about this expanding portfolio of threats and manage them in a consistent way is underpinned by their risk taxonomy. ![]() Risks such as conduct, cyber and third party have risen in importance and now dominate boardroom agendas. ![]() There has been a substantial change in the operational risks faced by financial services firms over the last fifteen years.
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