Operational Risk is Not Just “Other” Risks

This chapter explains how serious changes in the global financial markets in the last 20 years or so have caused noticeable shifts in banks’ risk profiles. The global financial system has been characterized by globalization and deregulation, accelerated technological innovation and revolutionary advances in the information network, and an increase in the scope of financial services and products. Globalization and financial deregulation have been working to effectively put together the world's dispersed financial markets into a unified complex network. Financial globalization due to financial liberalization has caused players in the financial and business sectors across the world economies to be subject to an unprecedented degree of competition, from both domestic and foreign counterparts. In the financial industry, banks are not the only ones concerned with operational risk.