Banking

New PDF release: Managing Operational Risk: Practical Strategies to Identify

By Douglas Robertson

ISBN-10: 1137442174

ISBN-13: 9781137442178

ISBN-10: 1349565695

ISBN-13: 9781349565696

Operational probability is the chance of loss from insufficient or failed inner strategies, humans, and platforms or from exterior occasions. This publication explores the different sorts of operational danger that threaten monetary associations, and specializes in functional due-diligence methodologies that may be used to spot those dangers ahead of it truly is too past due.

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Additional info for Managing Operational Risk: Practical Strategies to Identify and Mitigate Operational Risk within Financial Institutions

Sample text

In addition to defining operational risk from the perspective of financial institutions, we have identified many of its unique characteristics and discussed ways to categorize operational risks. We have also acknowledged several factors that have contributed to the growing importance of and dangers posed by operational risk. In chapter 2, we identify what options are available to financial institutions to help them combat and control operational risk. 2 Operational Risk Management Practices In this chapter, we discuss the three pillars of operational risk management: capital allocation, transfer of operational risk through insurance, and proactive mitigation of operational risk through product inspection and quality control.

These initial results suggested that the simpler approach to calculating capital for operational risk could do away with business-line distinctions and just apply higher requirements as the Business Indicator measure of income increases. The new Business Indicator Approach incorporates these changes. Estimates of capital requirements under the old Basic Indicator Approach and the new Business Indicator Approach provide a measure of Basel Committee expectations for minimum operational risk capital amounts before and after the financial crisis.

Although the US implementation of the Basel II capital standards does not require an explicit capital calculation for most US banks, this regulatory exception does not mean that these banks are immune to operational risk. If anything, the absence 32 Managing Operational Risk of explicit capital requirements may increase their vulnerability to operational risk if the lack of a capital rule diminishes the importance of operational risk in the eyes of the institution’s senior management and board of directors.

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Managing Operational Risk: Practical Strategies to Identify and Mitigate Operational Risk within Financial Institutions by Douglas Robertson


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