OPE25’s Sector Case Report—RWA Calculation for Operational Risk: Corporate Accounting FinTech Cash Surplus (Economic Capital Accounts and SOX Ratio)

Abstract

This article is the culmination of the research and practical work of the network of academics and industries which has been set up worldwide since 2013 to help banks and the credit risk counterparty business sectors through action research and appropriate publications in Corporate Accounting FinTech to cross the threshold of OPE25 effective January 1, 2023. The OPE 25 standard—Calculation of RWA for operational risk indeed underpins the accounting and financial management strategy of Banks and Counterparties Credit Risk or CCR (insurance companies, industries, and services, including local authorities). The forward management paradigm serving as the basis for insuring bank credit and raising funds on the stock market has changed. Forecasting future sales based on past sales data is no longer enough: To be realistic, the mathematical or quantitative approach (statistics and probabilities) for estimating the forecast turnover and future cash flows, in particular the calculation of the growth rate, must now be linked to the use of historical data (at least 5 years) and the future financial performance plan (over at least 3 years), to the corporate accounting process taking into account the total paid workforce, due to the predominant effect of HR, to mitigate losses generating economic capital accounts and the SOX ratio impacting both the cost price of products and services sold and the competitiveness of the entity and securing investments. This is the requirement of the “General criteria on loss data identification, collection and treatment”, (BCB S , 2017 a ) which is now incorporated into the Consolidated Basel III Framework, for OPE25, https://www.bis.org/basel_framework/ ) .