Operational Risk Management

Operational risk (also “OpRisk”) continues to evolve. While operational risk management added quantitative approaches prior to the 2008 financial crisis, enhancements since the crisis have been significant. Because the financial crisis was driven by inadequate preparedness for both credit and operational risk, these two risk areas have been among the focus areas for enhanced risk management following the crisis. The significant role of operational risk in capital stress testing has led many more banks to model operational risk. For this reason, we provide examples of stress testing models in this chapter. We also discuss benefits and challenges of the latest approaches to operational risk management and measurement. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.