Operational Risk Management: Theory and Practice for RMCI 2004

摘要

Credit, investment, and marketing risks may have either a positive or negative outcome. The term Operation Risk is used in this paper to refer to risks that always have a negative impact. Risk Management is used here narrowly to refer to the selection of actions intended to mitigate the impact of operational risks on an enterprise. The core issue in devising a risk management strategy is the allocation of risk management resources. It is important to note mat these decisions have a quantitative, monetary dimension. One cannot decide to "more" or "less." One must decide if a specific sum of money should be spent in a specific way to mitigate risks. This paper addresses both the theoretical and the practical aspects of the risk management decision-making process. Specifically, this paper develops the theory of optimized risk management decision-making, and then addresses the practical issues that arise when the theory is applied in the real world.