Abstract
Operational risk is a fluid risk that contains elements of four types of risk: catastrophic, creeping, generic, and specific. As the characteristic and extent of the impact of a risk is by nature extremely difficult to map fully, the use of categories and subheadings enables a big picture of the different risks and total risk to be built up. The operational risk profile changes constantly as factors, such as the strategic aims of the business, the activity and the structure of the business themselves change. Operations risk, in most cases, comprises the risk associated with process flows, procedures, transaction completion (settlement), and the people and systems that perform and manage these tasks. In financial markets, this includes the processes from pre-trade to post-trade and on to final settlement and custody, plus the structure that is in place to facilitate this. It is evident that the operations risk element is intrinsically linked to the type of activity undertaken by the organization, as along with the complexity and level of activity. The geographical structure and business profile, plus the client base will also have a significant bearing on the type of risk situations that will be possible. Technology is clearly a major influence in terms of risk types and levels.
Published Version
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