Prerequisites for op risk decisions and management

Operational risk management as part of strategic and day-to-day risk-based decision-making depends on high-quality information and the ability and willingness of people to participate in the op risk management process. An appropriate organisational structure as well as incentive systems are necessary to achieve this. By Marcus Haas and Thomas Kaiser

The business of banking is based on the taking of risks as defined by the overall risk strategy. Thus, in addition to income and costs, risks have to be taken into account in both strategic as well as day-to-day decision-making. The need to express risk in numbers is the basis of one of the basic risk management tenets, namely "you can't manage what you can't measure".

The need to measure op risk does not only stem from the regulators' requirements set out in Basel II. Op risk is nowadays