Operational Risk: A Guide to Basel II Capital Requirements, Models, and Analysis

Preface

The field of risk management has it origins in the insurance industry. In the 1980s, risk management in manufacturing firms took hold with the adoption of total quality management. It was not until the 1990s that the field of risk management received greater recognition for its importance in financial and nonfinancial corporations. In 1993, for example, GE Capital designated a chief risk officer (CRO), James Lam, charged with the responsibility of managing all aspects of the firm’s risks, including back-office operations. Today, most major firms have as part of their corporate executive staff an individual with the title of CRO who in some cases have a direct line reporting to the board of directors.

As further evidence of the growing importance of the field of risk management, today there are designations that can be earned to identify risk management specialists, just as with accountants (CPAs) and asset managers (CFAs). For example, the Global Association of Risk Professionals (GARP), founded in 1996 and with roughly 58,000 members from more than 100 countries, awards the Financial Risk Management (FRM) certificate upon the completion of a series of examinations. Universities offer not only courses on risk management, but also degrees in the area of financial engineering, with risk management being a major part of the curriculum. The number of books published each year on various aspects of risk management continues to grow. The interest in risk management by the general ...