Basel Publishes Guidance on Operational Risk Supervision and Management
The Basel Committee on Banking Supervision (the "Basel Committee") published guidance on sound practices for the management and supervision of operational risk. The guidance defines "operational risk" as the "risk of loss resulting from inadequate or failed internal processes, people and systems or from external events," and declares that operational risk management is now viewed as comprehensively as the management of credit and market risk. The guidance details principles for establishing an appropriate risk
management environment, including: (1) the bank’s board (the "Board") should treat operational risk as a distinct category of risk, and develop a framework defining it on a firm-wide basis and laying down principles
as to how it is to be assessed, monitored and mitigated; (2) the Board should ensure the operational risk management framework is subject to internal audit by independent staff (the internal
