7 - Risk and regulation

Abstract

This chapter outlines a set of principles that provide a framework for the effective management and supervision of operational risk for use by banks and supervisory authorities when evaluating operational risk management policies and practices. The Basel Committee on Banking Supervision (the Committee) recognizes that the exact approach for operational risk management chosen by an individual bank will depend on a range of factors, including its size and sophistication and the nature and complexity of its activities. It is extremely important to understand that in today's employment environment life style, management issues can be a very major operational risk and a massive challenge for operations managers. Employees that are placed under stressful situations may not only perform poorly and therefore, affect risk but may be so affected that law suits may follow. The laws affecting the workplace in terms of diversity and other personnel-related issues are not simply something for HR to worry about; they are very much in the operations managers' domain.