Operational Risk in Financial Services: A Review and New Research Opportunities

Abstract

The financial services industry differs from other service industries in ways that affect the nature of the operational risks it is subject to. In recent decades, many books and papers have focused on operational risk in financial services. However, the literature has focused mainly on the conceptual and statistical aspects of operational risk management and not on its operational aspects. Operational risk in financial services has not received much attention from the operations management community. This paper is based on the premise that operational risk in financial services can reap significant benefits from research done on the theory and practice of operations management in other industries. Moreover, the particular challenges and questions raised in the practice of operational risk management may stimulate future research in this particular domain of operations management. We provide a framework to describe and analyze operational risk from an operations management perspective, focusing in particular on process design, process management and human behavior aspects.

Keywords: Operational Risk, Process Design, Process Management, Human Induced Risks