Academic journal article ABA Banking Journal

Giving Banks Elastic Response

Academic journal article ABA Banking Journal

Giving Banks Elastic Response

Article excerpt

It's the popular refrain that we live in riskier times. Just turn on the television or pick up a newspaper: Potential threat, it seems, lurks behind the facade of routine existence as a force on par with nature. It's the sum of all that might go wrong, and increasingly seems to intrude, catching people that should be guarding our infrastructure unaware. Risk reveals itself in the narrative of deceit, surprise attack, or sudden disruptive event from the actions or effects of rogue traders, mutating viruses, snipers or terrorists.

Few in business would disagree that incompetence, fraud, or accident must be catalogued, addressed, and contained. The debates begin on the subject of how that containment should be engineered. As the title of this supplement hopes to evoke, the quest for safety and soundness is becoming a higher profile pursuit, in line with growing revenues or boosting market share. We intend this to be a source of trend information and practical advice on the topics of risk measurement, mitigation, and business continuity planning.

As the new Basel Accord, to be published in 2004 and phased in by 2007, insists, the young but developing discipline of operational risk will need to be cultivated further to yield a systematic, "live" picture of a bank's risk posture. Like all great ideas, it's far easier said than done. …

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