There are several types of financial risks that the
banking business has to manage. Among these, credit, liquidity
and market risks are those that–until
recently– were given the most attention by financial
institutions and regulators, due to their complexity and high
financial costs if materialized. Paraguay's experience in the
nineties, however, has shown that operational risks, if not
managed appropriately, could potentially trigger severe
financial and economic crises. Our experiences show that
internal fraud and lack of sound governance policies across key
systemic institutions led up to a crisis costing around 50% of
national GDP in a 5-year period.
Operational risk was originally conceived...