Fundamental issues in op risk management
Misconceptions about certain key concepts are causing confusion throughout the industry. By Ali Samad-Khan, Armin Rheinbay and Stephane Le Blevec
Sound operational risk management (ORM) begins with a comprehensive understanding of certain fundamental concepts, some of which are badly understood and many of which are completely misunderstood. The purpose of this article is to explain some of these misconceptions and to shed light on the issues causing the most confusion throughout the industry.
The meaning of risk
Understanding the meaning of the term risk is the most fundamental prerequisite to developing an ORM programme. Many
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