Operations risk management at a major bank

Risk management decisions are among the most conceptually difficult ones faced by managers. Financial institutions depend upon their operations and may incur considerable losses if those operations are interrupted. The authors participated in the development and implementation of an operations risk management program in one of the nation’s largest banks. They developed a methodology, based upon decision anaysis, as a framework for making risk management decisions. The bank implemented an ongoing corporate-wide contingency-planning program for all operation’s services, using the risk management methodology to analyze operational risks in a probabilistic environment. This program, implemented prior to regulatory mandates, remains an industry leader for over a decade.