As the financial crisis continues to unfold, one area of risk management that is gaining an increasing amount of attention is operational risk. Operational risk is typically defined as the risk of loss resulting from inadequate or failed internal processes, people, technology or from external events. Earlier this year, the massive trading losses at Société Générale resulting from the activities of a rogue trader exemplified the need for stronger operational risk management practices. Just last week, the Financial Times reported that,
".....some of the world’s biggest investment banks, including Goldman Sachs, Morgan Stanley and Citigroup, issued a report criticising risk management at their own institutions and urging “serious and sustained investment” in better people and technology."
Greater investment is needed to get ahead of the operational risk curve before the next rogue trader comes along. What do you think? Please share your comments below.
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