Institutionalizing operational risk management

An empirical study

Carol Hsu

James Backhouse

Leiser Silva

pp. 134-166

in: Leslie Willcocks, Chris Sauer, Mary C. Lacity (eds), Enacting research methods in information systems 2, Basingstoke, Palgrave Macmillan, 2016

Abstract

The 2007–2009 crisis was at first seen as a failure of global finance in financial and economic terms but then as a concatenation of operational risk failures triggered first in the mortgage industry and subsequently in all the other financial institutions in asset-backed securities markets (Robertson, 2011; Andersen et al., 2012). Operational risk management (ORM) is a field of knowledge that emerged in the 1990s in a context of mounting losses associated with the misuse of IT-based access privileges and systems failures in the financial industry. As a direct consequence, the Basel Committee (2005: 140) on Banking Supervision began requiring financial institutions to implement arrangements for managing operational risk, which it defined as "the risk of loss resulting from inadequate or failed internal processes, people, and systems or from external events".