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RCSA reports from all RCSA entities are submitted to the central group in the entity to arrive at an overall risk for the entity. Based on the organization hierarchy, we can define the RCSA entities or units which will perform tests and measure risks, implement controls, measure their effectiveness and keep improving continuously. The first step is to define the organization hierarchy and make a list of top level risks for the organization. Typically, an organization implementing the RCSA processes will go through the steps described below.
![orx operational risk orx operational risk](https://managingrisktogether.orx.org/sites/default/files/public/styles/opengraph_image/public/blue_purple_key_rgb.png)
Corrective actions are tracked and implemented continuously.Thus all departments in bank can be RCSA units and one can consolidate the RCSA and come up with an RCSA rating for the bank It is done at an RCSA entity (unit) level and all RCSA for entities (units) in an entity are put together to come up with an RCSA for the entity.It is iterative – one puts controls, sees its effectiveness and changes it, if is not effective.It keeps changing all the time based on controls introduced by the unit When breakdowns in the controls environment are identified they are proactively tracked until fixed. RCSA is a dynamic and iterative method for identifying important operational risks and Key Controls and for assessing and reporting on their effectiveness for each RCSA entity. Projections based on these numbers using statistical tools could help us in computing the capital charge as described in later sections of this document. The frequency of loss events could be mitigated by controls and constant measurement can result in computation of an average loss frequency and average loss value for a given period of time. Each incident will have an associated monetary loss value associated with it. They can occur in any unit in the bank like a branch, IT department, Sales department, Controls department – it can occur in any department irrespective of whether it is a profit centre or loss centre.
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There are a number of incidents (called Loss Events) which occur in all the above categories. Operational Risk can be divided into three categories as shown below: This data will form the basis for computation of operation risk capital charge using AMA approach.
![orx operational risk orx operational risk](https://managingrisktogether.orx.org/sites/default/files/public/styles/opengraph_image/public/orx_three_cases_for_machine_learning_in_operational_risk.png)