Operational Risk Event

Events are usually recorded with date of occurrence, date of discovery, cause, business line and amounts. Losses can be direct, such as fraud or compensation, or indirect, such as lost revenue. Firms also record near misses, where an error was caught before loss, and sometimes unexpected gains, because both show where controls are weak. An event is classified using the Basel list of seven types, and one root cause may produce a cluster of related events. Events feed the loss event database, and large ones are escalated to senior management and sometimes to the regulator. The distinction from the broader risk is simple: the risk is the possibility, while the event is the thing that happened. Near misses are the cheapest lesson on offer: the control failed, but no money left the building.

A clerk at an insurer keys a premium refund twice, sending 12,000 to a customer by mistake. A reconciliation catches it the next day and the customer returns the money. No net loss remains, but the insurer logs it as a near miss, tags it to process errors and notes that the payment screen lacked a duplicate check.