Managing Operational Risk in Financial Markets

As part of the research for this book, a series of in-depth inter-

views were conducted with practitioners from within the financial

markets industry. The interviews focused on the current organiza-

tional structures, people, processes and technology within the

operations functions. During the discussions, the interviewees

were encouraged to outline their organization’s policies to risk

management in general and operational risk in particular.

The interviews were conducted with senior personnel within the

organizations who either had responsibility for the operations

area or were responsible for operational risk management. A

market supervision and compliance manager from a futures and

options exchange in London was interviewed to provide an

exchange perspective on its own operational risk management as

well as its responsibility to ensure the correct market operation

through member audits and inspections. Additionally, informa-

tion systems suppliers and management consultancies were inter-

viewed.

The financial institutions selected for the research ranged from

small brokers who traded only in London to large and diverse

investment banks that traded in all the major financial centres.

The operations varied from small administrative functions that

provided support for the house traders to large multi-functional

departments that were set up as profit centres to provide full clear-

ing and settlement services for both client and house trading. The

selected sample of banks included American, European and

Japanese institutions.

As most of the institutions insisted on anonymity as a precondi-

Operational risk survey

carried out for this book

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