Operational risk

WHAT IS THIS? Operational risks are those arising from people, processes and systems – the biggest form of exposure for many industries, but one that was neglected by financial firms until the collapse of Barings Bank in 1995. It was added to the Basel capital framework in 2004, but attempts to model operational risk were dealt a heavy blow by the huge, unforeseen losses suffered by banks in the aftermath of the financial crisis.

UK's FSA reforms ORIAG as ORSG

The UK's Financial Services Authority (FSA) has reformed its Operational Risk Implementation Advisory Group (ORIAG) as the Operational Risk Standing Group (ORSG), after deciding to disband ORIAG in the fourth quarter of 2003. The group is being chaired…

Op risk systems come to the fore

Operational risk came to the fore in 2003. Major software suppliers such as SunGard and SAS entered the market through partnerships with or acquisition of early entrant developers, while a number of established trading and risk management systems…

Regulators' operational risk definitions criticised

The lack of a common agreement on the definition of operational risk by regulators will cause serious problems for global financial institutions, said Joanna Benjamin, a consultant to law firm Clifford Chance, at a late-November seminar at the firm's…

Insurers must do better - FSA

A new study by the UK's Financial Services Authority into risk management at insurance firms concludes that, although practices are improving in general, there is a long way to go before insurers are at the same standard as other types of financial…

Rumbles in the ratings jungle

Things are astir in the ratings jungle. Moody's published a paper earlier this year detailing a specific approach to assessing operational risk. Fitch will shortly be devoting a separate section of its rating reports to op risk. And Standard & Poor's,…

Reuters enters the op risk software market

NEW YORK - Reuters is the newest player in the op risk software field. The global information technology company is preparing to launch an as-yet-unnamed op risk software solution in the next two months, says Julian Fisher, head of operational risk at…

Hong Kong to adopt loose approach to Basel II

The Hong Kong Monetary Authority, the financial regulator for the special administrative region of China, will not be mandating that certain types of banks adopt certain portions of the revised Basel Accords, according to a speech by Simon Toping,…

CP3 Comment: Why be standardised?

It seems such a short time ago that we were building a new capital Accord, which would incentivise banks to improve their risk management and encourage them to move along the spectrum of the new Accord's three stages. How rapidly things can change.

Operational risk: a practitioner's view

The Basel Committee on Banking Supervision ("the Committee") released aconsultative document that included a regulatory capital charge for operationalrisk. Since the release of the document, the complexity of the concept of "operationalrisk" has led to…

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