Risk Scenario Analysis – the XOI Method

XOI

All major risks must be identified using a combination of the risk register, internal and external losses and a prospective trend analysis.

Then, each scenario can be evaluated using the XOI method. For each scenario, the XOI method offers a structured approach to identify and evaluate:

  • The exposure at risk, or X: is the resources exposed to the events under consideration (eg employees for fraud, buildings for disasters, operations for errors, products for legal risk, etc.)
  • The occurrence of the scenario, that is, the probability that a particular exposed unit is hit by the risk
  • The impact of the scenario, ie the cost of the scenario when it occurs. This includes the decomposition of cost factors (direct costs, additional costs, fines, etc.) and the identification of the circumstances driving the magnitude of this cost.

 

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Use Cases

Used for Regulatory Requirements (CCAR, Capital)

Operational risk represents a significant share of regulatory capital for financial institutions.

 

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Optimise insurance
coverage

Firms must adapt their insurance programs to their risk profile.

 

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Evaluate Risk Management Actions

Risk mitigation actions are relatively easy to assess for recurring risks.

 

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Our Team

Patrick

Laurent

Laura

Sophie

Christophe

Clémentine

Victor

MSTAR IS USED IN REGULATORY APPROVED MODELS
FOR CAPITAL AND CCAR IN EUROPE, UK AND US.

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