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Modeling
Challenges: Conceptual issues in impact calculation
>Every bank needs to establish a minimum threshold for recording
operational risk impact
–these thresholds may
differ from bank to bank making
internal and external
data incompatible.
>A single operational risk event may have impact on several
business lines which requires empirical distribution of impact
value that may not be accurate.
>Empirical methods for operational risk
impact distribution over different business lines may differ from bank to bank.
>Tail prediction dilemma stays with impact calculations too!