Business Disruption

From Open Risk Manual

Definition

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

  • Systems
    • Hardware
    • Software
    • Telecommunications
    • 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

Mitigation

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

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