Operational Risk: Heeding the Call of Basel II
Financial institution operational risk issues have cycled back into the spotlight with the sub-prime mortgage lending crisis and isolated events such as that of Société Générale’s staggering loss due to a trader’s actions. And, in addition to highly-topical overall risk management for bankers today, the resurgence of operational risk management is being driven by Basel II compliance. In fact, it is a key component of Basel II which is being implemented in the U.S. this year.
Once again attention is being turned not only to credit and market risk, but also operational risk. In this Strategic Commentary, entitled “Operational Risk: Heeding the Call of Basel II,” Speer & Associates, Inc. (S&A) reviews the role of operational risk within Basel II and the issues around the adoption of an AMA based operational risk framework. The requirements are complex, and banks would do well to pay close attention to each dimension.
