BANK 7.3.2 Meaning of gross loss, recovery and net loss for operational risk events

(1) The gross loss for an operational risk event is the loss resulting from the event before any kind of recovery. Gross loss from such an event includes:
(a) any direct charge (including any impairment or settlement) to the relevant firm’s profit and loss accounts;
(b) costs incurred as a result of the event, including expenses directly linked to the event (such as legal expenses and fees paid to advisors or suppliers) and costs of repairs or replacements;
(c) provisions or reserves accounted for in the profit and loss accounts against the loss;
(d) losses temporarily booked in transitory or suspense accounts and not yet reflected in the profit and loss accounts;
(e) negative economic effects, booked in an accounting period, resulting from operational risk events affecting cash flows or financial statements in previous accounting periods.
(2) A recovery for an operational risk event is an independent occurrence, related to the event, but separate in time, in which funds, or inflows of economic benefits, are received from a third party.
Examples
payments received from insurers
repayments received from perpetrators of fraud
recoveries of misdirected transfers
(3) The net loss for an operational risk event is the loss resulting from the event after any recovery.
Derived from QFCRA RM/2020-2 (as from 1st January 2021)