Business Disruption denotes risk of losses arising from the disruption of business or system failures. It is a recognized risk category in regulatory frameworks worldwide (Basel II standards).
Basel Level 2 & 3 Event Type Classification
- Utility outage / disruptions
Examples by Business Line
Types of business disruption may vary by business line. An indicative list:
- Retail Banking: Utility outage, Online system failure
- Payment & Settlement: Failure of payments infrastructure
- General: IT system failure
Risks in this category can be mitigated by system upgrades, redundant systems etc.
Issues and Challenges
- As with all operational risks, difficult to obtain objective measures of actual risk, both before and after the application of controls
- Operational Risk in the Basel ii framework
- Revised international capital framework is the text of the new Basel II Accord.