Ten years ago operational risk was a relatively minor consideration – not something to be managed, calculated and disclosed in the same manner as credit and market risk. Very few institutions made a concerted organization-wide effort to identify areas of operational risk, understand its impact, or put in proactive measures to mitigate it.
But all that has changed. Today, a bank’s ability to understand and manage operational risk is a key factor for commercial success – and the penalties for failing to manage it are growing in size and impact.
This paper looks at four trends driving an increased focus on operational risk. It explores the dangers for financial institutions that continue to manage operational risk in a siloed, ad-hoc and backward-looking manner. And it sets out the many benefits for institutions that can manage operational risk in a strategic way – and demonstrate convincingly that they are doing so.
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