Operational Risk Management in Banks and Idiosyncratic Loss Theory: A Leadership Perspective

A systemic risk event that leads to significant losses in banks that are significant financial institutions can expose them to insolvency, significant volatility and impose serious negative impact on a country’s economy, as witnessed during the 2008 financial crash. The viral spread of operational losses through global markets by interconnected multinational banks can be referred to as idiosyncratic viral loss theory. Operational Risk Management in Banks and Idiosyncratic Loss Theory: A Leadership Perspective identifies important considerations that can bolster effective risk management practices in comprehensive enterprise-wide risk, fraud control, going beyond minimum risk assessment required by banking regulators as well as independent risk identification and management. These considerations towards improving risk management practices may help reduce systemic operational losses spread virally in banks. Operational Risk Management in Banks and Idiosyncratic Loss Theory is a useful tool for scholars, bank practitioners, regulators, and accountants to understand the behaviour of idiosyncratic viral losses in banks and in the use of effective risk management practices. Bank practitioners and regulators can leverage the suggestions made by the panel of sector experts and bank leaders to construct action plans and training programs.

Table of Contents:
Introduction. Outline of chapters PART I. Idiosyncratic Viral Losses Behavior and Global Economic Impact Chapter 1. Idiosyncratic Viral Losses and It’s Behavioral Practices Chapter 2. Regulation of Operation Losses and Capital in Banks Chapter 3. Idiosyncratic Losses in Mega Banks and SIFIs Chapter 4. SIFI Losses and Global Economic Impact Chapter 5. Idiosyncratic Viral Losses and Operational Risk PART II. Nature of Systemic Operational Risk (Human Error, Fraud, Legal) Chapter 6. Human Error and Processing Errors Chapter 7. Fraud and Criminal Activity Chapter 8. Internal Fraud Chapter 9. External Fraud Chapter 10. Legal expenses, Legal settlements, Statutory Penalties PART III. Operational Risk Environment and Leadership Chapter 11. Technology Risk Chapter 12. Natural Disasters and Viruses Chapter 13. Risk Management Chapter 14. Bank Operational Environment as Host for Idiosyncratic Viral Losses Chapter 15. Control Environment and Systemic Risk Chapter 16. Governance and Leadership

About the Author :
Sophia Beckett Velez, PhD, over 16 years as a Certified Public Accountant with large banks providing consulting services, performing financial audits, attestation services, and risk management analysis of large banks. Many of the regulatory compliance problems noted during her review of the large banks required her to cultivate relationships with key business managers, working with them to develop action plans and solutions to these issues. This sparked her research interest to explore the issues at hand in the banks as they magnified after the 2008 recession.