4 Operational Risk in Financial Services

摘要

As already discussed in the Introduction, operational risk events in financial firms, according to Basel II, may be due to four types of causes, namely (i) people risk (e.g., internal or external fraud, human errors, incompetency), (ii) process risk (e.g., monitoring and/or auditing lapses, insider trading, rogue trading, money laundering), (iii) systems or technology breakdowns, (e.g., hardware malfunction, software bugs), and (iv) external events (e.g., natural disasters, terrorism). Chernobai et al. (2011) analyze the determinants of operational risk events in U.S. financial institutions. Li et al. (2017) present a detailed overview of the characteristics of most operational risk events involving trading related failures occurring up to 2012. Xu et al. (2017a) provide a detailed categorization and overview of the various forms of operational risks in the finance world.