Operational Risk Management

Preface

The management of operational risk is one of the broadest functions of any bank or financial institution and one of the hardest to compartmentalise. Over the past two decades, understanding of operational risk has grown rapidly. Alongside this understanding, however, the realisation has emerged that only limited data is available. As a whole, the banking industry often has to deal with operational risk by trial and error. This book continues the discussion of bank operations. It examines how banks deal with operational risk, considers some case studies and lessons from the past and discusses how regulators approach operational risk.

This book is divided into four parts and eleven chapters that delve deeply into the subject matter. Despite the depth, the discussion here is unlikely to be enough to fully grasp the challenges of operational risk that have been high up on the list of considerations for the Basel Committee on Banking Supervision (BCBS) since the late 1990s. Further reading is encouraged and suggestions are provided at the end of each chapter.

Every effort has been made to ensure that policies and regulations discussed in this book are up to date and current. Most regulations on operational risk in use around the world are based on Basel II, which this book discusses at length.

The first part of this book starts with a background discussion of what operational risk is in the banking industry as differentiated from other types of risk commonly addressed such as ...