Internal Loss Data Collection Implementation: Evidence from a Major UK Financial Institution

Abstract

The paper conducts a critical analysis of internal loss data collection implementation in a UK financial institution. We use elite semi-structured interviews, with a sample of 15 operational risk consultants from a leading international financial institution. Using content analysis, the data covers a wide range of business areas, with particular attention drawn towards the development of internal loss collection and operational risk management. The results suggest that the development of operational risk management as a function stems from external compliance (Basel II) and the internal pressure to add value to the business portfolio. This need for compliance was augmented as a driver of internal loss data collection; however, participants also recognised that the function of loss data collection is a tool of solid internal risk management and enhances managerial decision-making. The research also highlights the problems in cleansing data in order to ensure that all information implemented in the capital allocation model is valid and reliable.