Operational risk: looking at the bigger picture

In the first of a two-part feature, Mark Holmes suggests that financial firms' operational risk issues would be better understood and handled by taking a leaf out of the op risk concepts and techniques developed in other industries.

The goal of risk management is to avoid large unexpected losses and to protect capital. In this regard, significant progress has been made over the past decade in the measurement and management of market risk and credit risk. It has progressed to the extent that senior management, shareholders and regulators have reasonable confidence that these types of risks can be quantified reliably and controlled effectively. It is difficult to argue that the same situation exists in relation to operational