Transcription of Operational Risk Management: An Evolving Discipline
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Operational Risk Management: An Evolving Discipline
Operational Risk Management: An Evolving Discipline 4 Supervisory InsightsSummer 2006 Operational risk is not a new concept inthe banking industry. risks associatedwith Operational failures stemming fromevents such as processing errors, internaland external fraud, legal claims, andbusiness disruptions have existed atfinancial institutions since the inceptionof banking. As this article will discuss,one of the great challenges in systemati-cally managing these types of risks isthat Operational losses can be quitediverse in their nature and highly unpre-dictable in their overall financial impact. Banks have traditionally relied onappropriate internal processes, auditprograms, insurance protection, andother risk management tools to counter-act various aspects of Operational tools remain of paramount impor-tance; however, growing complexity inthe banking industry, several large andwidely publicized Operational losses inrecent years, and a changing regul
on a variety of risk factors (e.g., credit, market, interest rate, operational). However, within these internal capital measurement and management Supervisory Insights Summer 2006 Table 2 Traditional Practice Emerging Practice Comparison of …
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