The banking industry has been one of the leaders in the adoption of the enterprise risk management (ERM) approach to arrive at a comprehensive picture of risk exposure. While credit and market risks cannot be underestimated, operational risk has been growing in importance in the banking industry. Within operational risk, cyber risk has been growing rapidly while often remaining poorly understood.

The importance of cyber risk analysis in banking is becoming more widely recognized, and the management of cyber risk is no longer driven purely by regulatory compliance. It is a challenging task that requires improvements in the available analytical tools as well as the collection of additional data and better use of existing data. This explains Navigation Advisors’ concentration on:

• Advanced tools for analyzing cyber risk, quantifying cyber risk exposure, and expressing risk exposure in terms of probability distributions of potential financial losses
• Corporate risk governance and its impact on cyber risk exposure
• Quantification, in dollar terms, of individual components of potential losses from data breaches and other cyber events
• Threat intelligence, advanced persistent threats and insider threat analysis
• Cyber insurance/reinsurance pricing approaches that are data-driven and significantly more risk-sensitive than the methodologies currently used by most of the industry

Since much of the banking industry is part of the critical infrastructure, the need to address its considerable exposure to cyber risk is clear. Analysis of cyber risk is an essential part of this process.

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