Towards risk adjusted controlling of strategic IS projects in banks in the light of Basel II

Large-scale information systems (IS) investments of banks have direct impact on operational risk. After the New Basel Accord comes into effect 2006 operational risk may change the regulatory capital of banks. Considering long-term IS investments, one must take into account these effects even now. However, the possibility of integrating these effects in an investment decision depends on both applied investment measurement and Basel II risk quantification approach. The authors introduce a methodology for integrating these aspects into the decision process. Although there are several possible solutions, this paper emphasizes net present value as a controlling method and the loss distribution approach as a possible risk quantification instrument.