Financial institutions do not attempt to identify or assess levels of operational risk and its many sources. However, they come up with insurance policy to cover a particular risk and this coverage is intended for recovery in case of a loss. Operational risk however affects client satisfaction, reputation and shareholder value, all while increasing business volatility.
This volatility creates a bad loss ratio for the company. Operational Risks cannot be laid off; meaning that, as long as people, systems and processes remain imperfect, operational risk cannot be fully eliminated. Operational risk is, nonetheless, manageable as to keep losses within some level of risk tolerance.
1. Establish the circumstances that enabled the loss environment
2. Undertake comprehensive process procedures and system audit
3. Formulate the best way to recover the losses
4. Devise preventive methodology
5. Undertake controlled stress tests to our recommendations