The Operational Risk Function

Sergio Scandizzo

When the author first started working in operational risk, the most difficult part was getting out of the office to talk to somebody else in the bank. Be it at a workshop, a meeting, a presentation or sometimes even a coffee-machine chat, sooner rather than later the inevitable question would be asked: “What is it that you guys actually do?” The author truly felt it was unfair. For virtually any other activity, merely naming the simple job title (“I am a trader”, or a credit officer, or a lawyer) or mentioning the relevant part of the organisation (“I work in IT”, or in compliance, or in human resources) was a sufficient explanation. This was generally met right away with an “Aha!” of understanding (even if the other person had no real clue about what kind of work was actually involved). Operational risk always required a more detailed explanation and, it seemed to the author, some sort of justification, as if it were not at all clear that the job was worth the time and the money spent on it.

Although things have changed a lot since the publication of the first version of Basel II in 2001, operational risk management remains a profession that routinely feels the need to