2012 Registration document and annual financial report - BNP Paribas

5RISKSAND CAPITAL ADEQUACYOperational riskOPERATIONAL RISK EXPOSUREBanking regulation divides operational loss events into seven categories:(i) internal fraud, (ii) external fraud, (iii) employment practices (suchas an anomaly in the recruitment process) and workplace safety,(iv) customers, products and business practices (such as product defects,mis-selling, etc.), (v) damage to physical assets, (vi) business disruptionand system failures, (vii) failures in execution, delivery and processmanagement (data entry error, error in documentation, etc.).➤ FIGURE 11: OPERATIONAL LOSSES - BREAKDOWN BY EVENT TYPE (AVERAGE 2008-2012) (*)52% (2%)Employment practicesand workplace safety38% (37%)External fraud5% (6%)Internal fraud15% (13%)Clients, products andbusiness practices1% (1%)Damage tophysical assets2% (3%)Business disruptionand system failures37% (38%)Execution, deliveryand process managementExternal fraud and process failures, typically arising from execution ortransaction processing errors, represent the two main operational lossevent. Fraud of this kind, such as payment and credit fraud, is fairlycommon in the world of retail banking. In Corporate and InvestmentBanking, incidents of fraud are rarer but of larger scale.The third biggest loss event corresponds to events associated withbusiness practices, and the prevalence of these has been tending tostabilise over time after a phase of increase. Internal fraud accounts forabout 5% of the Group’s operational losses.The remaining types of incidents account for relatively small amountsof losses.The BNP Paribas Group pays the utmost attention to analysing itsoperational risk incidents in order to improve its already well-structuredcontrol system.(*) Percentages in brackets correspond to average loss by type of eventfor the 2008-2011 period.3142012 Registration document and annual financial report - BNP PARIBAS