System and method for assessing operational process risk and quality by calculating operational value at risk

• US 7,571,109 B2
• Filed: 07/14/2006
• Issued: 08/04/2009
• Est. Priority Date: 07/14/2006
• Status: Expired due to Fees

• Current Assignee: Fred E. Sommers, Robert A. Fawls
• Original Assignee: Fred E. Sommers, Robert A. Fawls
• Inventors: Sommers, Fred E., Fawls, Robert A.
• Primary Examiner(s): Jarrett; Scott L
• Application Number:
  US11/487,129
• Publication Number:
  US 20080015920A1
• Time in Patent Office: 1,117 Days
• Field of Search: 705/8
• US Class Current: 705/7.28
• CPC Class Codes: G06Q 10/06 Resources, workflows, human or project management; Enterprise or organisation planning; Enterprise or organisation modelling
• CPC Class Codes: G06Q 10/0635 Risk analysis of enterprise or organisation activities
• CPC Class Codes: G06Q 10/06395 Quality analysis or management
• CPC Class Codes: G06Q 50/18 Legal services

Abstract

Methods and apparatus for assessing operational process quality and risk of an entity or a group of entities. The present invention enables a user to effectively compare one or more events, representing what actually happened, with a reference, which represents ideal performance in terms of operational process quality and risk, and express the corresponding results in quantitative terms. The present invention is capable of presenting results in a form and with sufficient rapidity that a human decision-maker is able to timely observe conditions which represent unacceptable quality or excessive risk and respond appropriately.

Claims

1. A method for assessing operational process quality comprising the steps of:

identifying at least one entity which holds a legal, beneficial, contractual, regulatory or other interest in or obligation with respect to a financial instrument and at least one metric which has substantial correlation to operational process quality for a preselected operational process of said at least one entity, wherein said metric includes one or more factors or dimensions each of which is represented by a combination of an identifier and one or more values which correspond, respectively, to one or more values of the factors or dimensions at different points in time;

preselecting at least one operational process for quality assessment, wherein said operational process comprises one or more events which follow from or are necessary to initiate, sustain, maintain or terminate a legal, beneficial, contractual, regulatory or other interest or obligation with respect to a financial instrument;

obtaining data from one or more sources which represent at least one actual initial condition for said at least one entity;

continuously observing, for a preselected period of time, events which relate to said at least one entity and which represent actual performance of said preselected operational process, wherein each of said events comprises an action, transaction or omission with respect to a financial instrument that affects the value of said at least one entity;

applying said metric to said data and events;

processing said metric, using at least one processor of a computer system, to generate results which represent a comparison of actual performance of said operational process with ideal performance in terms of operational process quality for said at least one entity, wherein said ideal performance is defined by at least one rule and said comparison comprises a determination whether each of said events is compliant with said at least one rule, wherein said at least one rule comprises one or more logical expressions which represent an express, implied or mandated legal requirement or other expectation;

calculating, using said at least one processor of said computer system, an operational value at risk based on said generated results for said at least one entity; and

expressing substantially in real-time, using a graphical display of said computer system, said calculated operational value at risk for said at least one entity in quantitative terms, whereby a condition which represents a potential loss for said at least one entity is identified prior to recognition of an actual loss occurring.

8. The method as in claim 1, 2, 3 or 7 wherein said quantitative terms comprises basis points.

9. The method as in claim 1, 2, 3 or 7 wherein an event is represented by a combination of an event identifier, an entity identifier, a financial instrument identifier, one or more expected conditions, one or more actual conditions, a value and a category.

10. The method as in claim 1, 2, 3 or 7 wherein said rule is represented by a combination of a rule identifier, an entity identifier, an instrument identifier, a rule type and one or more conditions.

11. The method as in claim 1, 2, 3 or 10 wherein said method is used to assess the operational process quality associated with failing to comply with regulatory, contractual or other expectations attached to transactions involving one or more financial instruments.

12. The method as in claim 1, 2, 3 or 10 wherein said method is used to compare performances, in terms of operational quality, of two or more business organizations.

13. The method as in claim 1, 2, 3 or 7 wherein said method is used to measure and attribute operations performance.

14. The method as in claim 1, 2, 3 or 7 wherein said method is used to identify and prioritize operational and system improvement opportunities.

15. The method as in claim 1, 2, 3 or 7 wherein said method is used to calculate operating risk capital allocations or reserves to establish premiums or benchmarks for insurance underwriting purposes.

16. The method as in claim 1, 2, 3 or 7 wherein said method is used to distribute performance-based compensation.

17. The method as in claim 1, 2, 3 or 10 wherein said quantitative terms are calculated using a total value of the legal, beneficial, contractual, regulatory or other interest or obligation of a respective entity.

2. A method for assessing operational process quality comprising the steps of:

selecting at least one entity which holds a legal, beneficial, contractual, regulatory or other interest in or obligation with respect to at least one financial instrument and at least one metric with respect to a preselected operational process of interest of said at least one entity, said at least one metric having substantial correlation to operational process quality for said operational process, wherein said at least one metric includes one or more factors or dimensions each of which is represented by a combination of an identifier and one or more values which correspond, respectively, to one or more values of the factors or dimensions at different points in time, and wherein said preselected operational process comprises one or more events which follow from or are necessary to initiate, sustain, maintain or terminate a legal, beneficial, contractual, regulatory or other interest or obligation with respect to a financial instrument;

obtaining data from one or more sources which represent at least one actual initial condition for said at least one entity;

selecting event data which represent continuous observations of the actual performance of the preselected operational process of interest during a time period of interest wherein each of said events comprises an action, transaction or omission with respect to said at least one financial instrument that affects the value of said at least one entity;

applying, using at least one processor of a computer system, one or more process metrics and rules, which represent ideal performance of the operational process of interest in terms of quality, to the selected event data to produce intermediate results, wherein the intermediate results represent a comparison of actual performance of said operational process with ideal performance in terms of operational process quality for said at least one entity, wherein said ideal performance is defined by at least one rule and said comparison comprises a determination whether each of said events is compliant with said at least one rule, wherein said at least one rule comprises one or more logical expressions which represent an express, implied or mandated legal requirement or other expectation, wherein said at least one process measure comprises one or more logical expressions used to calculate operational process quality; and

applying the selected metric to said intermediate results, using said at least one processor of a computer system, to calculate an operational value at risk in quantitative terms, whereby a condition which represents a potential loss for said at least one entity is identified prior to recognition of an actual loss occurring.

3. A computer readable medium, including program instructions executing on at least one processor of a computer, the computer readable medium including program instructions for a method for assessing operational process quality comprising:

providing a data store, using a computer memory or computer data storage device, which contains data pertaining to at least one entity which holds a legal, beneficial, contractual, regulatory or other interest in or obligation with respect to at least one financial instrument and one or more events which represent continuous observations of the actual performance of a preselected operational process of interest, wherein each of said events comprises an action, transaction or omission with respect to said at least one financial instrument that affects the value of said at least one entity and data from one or more sources which represent at least one actual initial condition for said at least one entity;

providing a process measures and rules store, using said computer memory or computer data storage device, which contains at least one process measure and at least one rule pertaining to said preselected operational process of interest;

applying, using at least one processor of a computer system, said at least one process measure and at least one rule to selected data from said data store to generate intermediate results which represent a comparison of actual performance of said preselected operational process with ideal performance in terms of operational process quality for said at least one entity, wherein said ideal performance is defined by at least one rule and said comparison comprises a determination whether each of said events is compliant with said at least one rule, wherein said at least one rule comprises one or more logical expressions which represent an express, implied or mandated legal requirement or other expectation;

providing a metric store, using said computer memory or computer data storage device, which contains at least one metric having substantial correlation to operational process quality for said operational process of interest, wherein said at least one metric includes one or more factors or dimensions each of which is represented by a combination of an identifier and one or more values which correspond, respectively, to one or more values of the factors or dimensions at different points in time;

applying said at least one metric to said intermediate results to calculate, using said at least one processor of a computer system, an operational value at risk for said at least one entity; and

expressing substantially in real-time, using a graphical display of said computer system, said calculated operational value at risk in quantitative terms, whereby a condition which represents a potential loss for said at least one entity is identified prior to recognition of an actual loss occurring.

4. A computer system for assessing operational process quality comprising:

at least one computer memory or computer data storage device comprising a data store for data which is related to at least one entity which holds a legal, beneficial, contractual, regulatory or other interest in or obligation with respect to at least one financial instrument and one or more events which represent continuous observations of the actual performance of a preselected operational process, wherein each event comprises an action, transaction or omission with respect to said at least one financial instrument that affects the value of said at least one entity and data from one or more sources which represent at least one actual initial condition for said at least one entity;

said at least one computer memory or computer data storage device further comprising a process measures and rules store, coupled in communicating relationship with said data store, for applying at least one process measure and at least one rule to selected data of interest in said data store to produce intermediate results which represent a comparison of actual performance of said operational process with ideal performance in terms of operational process quality for said at least one entity, wherein said ideal performance is defined by at least one rule and said comparison comprises a determination whether each of said events is compliant with said at least one rule, wherein said at least one rule comprises one or more logical expressions which represent an express, implied or mandated legal requirement or other expectation;

said at least one computer memory or computer data storage device further comprising a metric store, coupled in communicating relationship with said process measures and rules store, for receiving said intermediate results and applying a selected metric to said intermediate results to calculate an operational value at risk for said at least one entity expressed in quantitative terms, said metric having substantial correlation to operational process quality for an operational process of interest, wherein said metric includes one or more factors or dimensions each of which is represented by a combination of an identifier and one or more values which correspond, respectively, to one or more values of the factors or dimensions at different points in time; and

a user interface, coupled in communicating relationship with said metric store, for enabling a user to select one or more metrics of interest and to display said calculated operational value at risk, whereby a condition which represents a potential loss for said at least one entity is identified prior to recognition of an actual loss occurring.

5. A computer system for assessing operational process quality comprising:

at least one computer memory or computer data storage device comprising a first store containing at least one metric pertaining to an operational process of interest, said at least one metric having substantial correlation to operational process quality for said operational process of interest, wherein said at least one metric includes one or more factors or dimensions each of which is represented by a combination of an identifier and one or more values which correspond, respectively, to one or more values of the factors or dimensions at different points in time;

said at least one computer memory or computer data storage device further comprising a second store containing observed event data which represent actual performance of the operational process of interest during a time period of interest;

said at least one computer memory or computer data storage device further comprising a third store, coupled in communicating relationship with said second store, containing one or more process measures and rules which represent ideal performance of the operational process of interest in terms of quality;

a processor for applying said one or more process measures and rules to selected event data to generate intermediate results and applying said at least one metric to said intermediate results to calculate an operational value at risk wherein the intermediate results represent a comparison of actual performance of said operational process with ideal performance in terms of operational process quality for said at least one entity, wherein said ideal performance is defined by at least one rule and said comparison comprises a determination whether each of said events is compliant with said at least one rule, wherein said at least one rule comprises one or more logical expressions which represent an express, implied or mandated legal requirement or other expectationl; and

a user interface, coupled in communicating relationship with said first store, for enabling a user to select one or more metrics of interest and to display said calculated operational value at risk, whereby a condition which represents a potential loss for said at least one entity is identified prior to recognition of an actual loss occurring.

6. A computer system for assessing operational process quality comprising:

at least one computer memory or computer data storage device comprising a first store containing at least one metric which has substantial correlation to operational process quality for a preselected operational process, wherein said at least one metric includes one or more factors or dimensions each of which is represented by a combination of an identifier and one or more values which correspond, respectively, to one or more values of the factors or dimensions at different points in time;

said at least one computer memory or computer data storage device comprising a second store, coupled in communicating relationship with said first store, containing event data received from one or more sources which represent actual performance of said preselected operational process for at least one entity which holds a legal, beneficial, contractual, regulatory or other interest in or obligation with respect to at least one financial instrument;

a processor for processing said metric using selected event data from said second store to generate results which represent a comparison of actual performance of said operational process with ideal performance in terms of operational process quality or risk, wherein said ideal performance is defined by at least one rule and said comparison comprises a determination whether each of one or more events is compliant with said at least one rule, wherein said at least one rule comprises one or more logical expressions which represent an express, implied or mandated legal requirement or other expectation;

calculating an operational value at risk based on said generated results; and

a user interface for expressing substantially in real-time said calculated operational value at risk in quantitative terms, whereby a condition which represents a potential loss for said at least one entity is identified prior to recognition of an actual loss occurring.

7. A method for assessing operational process quality comprising the steps of:

identifying a plurality of entities each of which holds a legal, beneficial, contractual, regulatory or other interest in or obligation with respect to a financial instrument;

preselecting at least one operational process for quality assessment;

identifying, for said at least one operational process, at least one metric which has substantial correlation to operational process quality for said preselected at least one operational process, wherein said at least one metric includes one or more factors or dimensions each of which is represented by a combination of an identifier and one or more values which correspond, respectively, to one or more values of the factors or dimensions at different points in time;

obtaining data from one or more sources which represent at least one actual initial condition for each of said entities;

continuously observing, for a preselected period of time, events which relate to all of said entities and which represent actual performance of said preselected operational process, wherein each of said events comprises an action, transaction or omission with respect to said financial instrument that affects the value of all of said entities;

applying said metric to said data and events;

processing said at least one metric, using at least one processor of a computer system, to generate results which represent a comparison of actual performance of said operational process with ideal performance in terms of operational process quality or risk for each of said entities, wherein said ideal performance is defined by at least one rule and said comparison comprises a determination whether each of said events is compliant with said at least one rule, wherein said at least one rule comprises one or more logical expressions which represent an express, implied or mandated legal requirement or other expectation;

calculating, using said at least one processor of said computer system, an operational value at risk for each of said entities based on said generated results; and

expressing substantially in real-time, using a graphical display of said computer system, said calculated operational value at risk for at least one of said entities in quantitative terms, whereby a condition which represents a potential loss for said at least one entity is identified prior to recognition of an actual loss occurring.