Modeling the unexpected

ELSEWARE helps clients assess risks prospectively, when relevant data is scarce and available knowledge is still uncertain.


Specifically, we help financial institutions develop structured assessments for their key operational risk scenarios (cyber, conduct, disruption, fraud, etc.) and assess the stress of climate change on operations and risks.

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News

Modeling Corporate Credit Climate Risk

In this featured article of the American Bankers Association journal, Patrick Naim and Laurent Condamin present a summary of our recent work on using Bayesian networks to model climate stress on corporate credit risk. This work was performed as part of the first climate stress-test carried out by the French regulator, APCR.

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RMA GCOR Virtual Conference 2021

Nedim Baruh, Head of Operational Risk Measurement and Analytics for JPMorgan Chase, and Patrick Naim, CEO of MSTAR have presented together "Measuring Climate Stress on Operational Risk" at the RMA GCOR Virtual Conference 2021.

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ABA Risk Quantification Forum 2021

MSTAR /ELSEWARE will be part of the virtual ABA RISK 2021 conference on March 23-25.The session will focus on “the Use of Structured Scenario Analysis in Modeling Climate Change Stress on Operational Risk”.

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The XOI Methodology

We are the designers of the XOI methodology, which is adopted by some of the world's leading financial institutions. The XOI approach (Exposure, Occurrence, Impact) decomposes the risk into 3 dimensions.

Exposure:
The number of resources exposed independently to the occurrence of an event. Exposed resources can be employees for fraud, suppliers for disruption, trades for errors, products for mis-selling, etc.

Occurrence:
This is the probability of occurrence of the considered event for one particular resource. This probability may depend on the resource itself of the firm controls and on external circumstances.

Impact:
This is the cost of the event should it occur for one particular resource. This cost is variable and depends on the resource itself, of the firm controls, and on external circumstances.

To learn how the XOI methodology can help you assess and evaluate operational risks, contact us

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Main references

The XOI Method and MSTAR tools are used by some major financial institutions.
  • Aviva
  • Barclays
  • Cartes Bancaires
  • Credit Mutuel
  • Credit Suisse
  • La Banque Postale
  • JP Morgan Chase
  • Natixis
  • SocGen

The XOI method and MSTAR have been used for regulatory approved internal risk measurement methods.
They have been adopted by the American Bankers Association as a tool for peer benchmarking of oprisk scenarios.

Click on the map or here to see the up to date reference list.

Tools and Services

MSTAR Desktop

Structured Scenario Design and Assessment

Working with traders exposes a firm to rogue trading; selling products exposes a firm to mis-selling and to anti-competitive practices; operating in buildings exposes a firm to natural disasters or terrorist attacks. From this point of view, operational risk is exposure based.
The design of a loss generation mechanism for a given scenario starts by identifying the Exposure for a scenario, i.e. the resources of the firm exposed to the event considered. A scenario is then fully defined by the resource (Exposure), the event (Occurrence), and the consequences (Impact).

MSTAR Desktop implements the XOI method and allows to you to design and quantify your own scenarios. Design and quantification are kept independent in order to allow independent quantification in different legal entities or business units.
The distribution of potential losses are calculated using simulation. Scenarios can be tested for what-if analyses, and aggregated with various correlation methods (causal dependencies, copulas, etc.)

MSTAR Platform

Be informed of what happened. Understand what could happen.

The MSTAR platform gives you access to a comprehensive library of operational risk scenarios exposure models and to a free news feed of operational risk news.
At the moment, 36 scenarios are available in the library in 7 risk categories : Conduct, Cyber, Disruption, Error, External Fraud, Internal Fraud, and Legal.
You can register for free on the MSTAR platform.

The MSTAR platform also exists as a peer platform hosted by trusted third parties to help you benchmark your scenario assessments.
The first MSTAR Peer platform hosted by American Bankers Association is online.

Consulting

A team of experts, researchers, and developers.

Elseware team is composed of highly qualified experts who are exclusively dedicated to applied risk research.
We design and develop innovative modeling methods, implement them in our tools, and apply them at leading financial institutions.

We have helped to completely redesign the operational risk scenario programs of several large financial institutions. We regularly assist our clients in meeting regulatory (CCAR, ICAAP) or non-regulatory requirements (e.g. climate stress exercises or TCFD). We also assist them during internal and external audits.

To learn how our tools and teams can help you assess and evaluate operational risks, contact us

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