Understanding Operational Risk in Financial Institutions

Operational risk is defined by the Bank for International Settlements as the “risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.” There are four exceptionally wide-ranging factors: internal processes, people, systems, or external events. To make them absolutely clear, the Bank for International Settlements has categorized them into seven distinct groupings that cover virtually every element of the operations of financial institutions outside of the credit and liquidity aspects.

This course examines each of the seven operational risks categories, and it provides a detailed explanation on each risk explaining what it is, what type of events are involved, why these activities pose a risk, and provides participants with clear practical examples.  

Operational risk is intrinsic in all banking products, all banking activities, all banking processes, and all banking systems. The effective management of all of these operational risks is a basic component of a bank’s risk management program.