Measuring and managing market, credit and Op risk [64]

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Bullet points include: Difficult to define precisely, could be defined as all risks faced by a financial firm except for credit, market, liquidity and insurance risks, e.g.: Fraud, legal risk, IT failures, disasters/accidents, mis-managed or poorly trained employees Business risk (here consisting of risk that firm will take poor decisions, for example engaging in a reorganisation that proves unprofitable) Asymmetric profile (downside but usually little or no upside risk) – So why do firms incur operational risk? Basel defines operational risk as “the risk of loss, resulting from inadequate or failed internal processes, people and systems or from external events”, i.e. excludes business risk

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