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Managing Operational Risk
New Insights and Lessons Learnt
Discipline: Operational Risk
No of pages: 316
First published:
ISBN: 9781782722861
The recent financial crisis has led to unprecedented levels of operational risk losses. In Managing Operational Risk: New Insights and Lessons Learnt, Michael Grimwade, author and head of operational risk for MUFG’s International Securities Businesses, argues that these operational risk losses are readily explicable and could be repeated in the near future.
Managing Operational Risk: New Insights and Lessons Learnt examines the ways in which market and credit risks were transformed into operational risk losses, and how the current actions of both central banks and regulators may be unwittingly sowing the seeds for a new wave of losses.
Contents
Introduction
Three Historical Spikes in Operational Risk Losses
First-Order Effects: Transforming Credit Defaults and Market Turmoil into Operational Risk Losses
Second-Order Effects: Transforming Rising Unemployment and Falling Interest Rates into Operational Risk Losses
Conclusions and Root Causes
Regulatory Change: Part of a Perfect Storm
Macroeconomic Threats: Tax, Rising Interest Rates and New Asset Bubbles
New Technology: Changing Business Models and Risk Profiles
Three Horsemen: Societal, Political and Environmental Change
Backtesting to the Mid-1990s and Conclusions
Defining and Cascading Operational Risk Appetites
Aligning Operational Risk Management Frameworks to Appetites
Estimating Exposures to Tail Events
Solutions for a Triumvirate of Seemingly Intractable Problems
Conclusions