Sponsor's article > The point of op risk

The inclusion of an explicit operational risk component in the proposed Basel II Capital Accord has caused widespread controversy. Much of this has surrounded the feasibility of accurately measuring, or even defining, such risk. In this first of three columns, David Rowe argues that a more important goal should be to improve the consistency of banks’ internal process execution.

More than 50 years ago, following their country’s defeat in World War II, some forward-looking Japanese business leaders sought ways to boost the country’s economic recovery. In their search to achieve a competitive edge, they believed improved product quality was a key requirement. At the time, to put it bluntly, ‘Made in Japan’ was a joke, synonymous with cheap products and shoddy workmanship. In seeking to change that reputation, Japanese business leaders were impressed by the work of a