What is External loss data in FRM Part 2?

Operational-loss observations from other institutions or consortia used to supplement sparse internal histories. External losses require scaling, threshold, reporting-bias, and relevance adjustments. Pooling them naively can distort the frequency and severity tail.

External loss data

FRM Part 2 glossary · Operational Risk

Definition

Operational-loss observations from other institutions or consortia used to supplement sparse internal histories.

External loss data in plain English

External losses require scaling, threshold, reporting-bias, and relevance adjustments. Pooling them naively can distort the frequency and severity tail.

Learn these first

Economic capital
Scenario analysis (operational risk)

Related FRM Part 2 terms

Annualized loss expectancy (ALE)
Bow-tie analysis
Business Indicator Component (BIC)
Common Equity Tier 1 Capital (CET1)
Digital Operational Resilience Act (DORA)
G-SIB surcharge
Loss Component (LC)
Impact tolerance
Key risk indicator (KRI)
Loss Distribution Approach (LDA)

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