Operational risk is the risk of loss from inadequate or failed internal processes, people, and systems or from external events. There are two types of operational risks: catastrophic and
non-catastrophic. The vast majority of operational risks are non-catastrophic, i.e., low-loss events that institutions ably contend with every day. Catastrophic operational risks, however,
can give rise to losses so extreme that they immediately put the survival of the institution at stake. This book explores the different types of operational risk that threaten financial
institutions. After briefly discussing the non-catastrophic operational risks that existing literature adequately covers, the author focuses on practical due-diligence methodologies
that institutions can use to identify less-familiar more-lethal catastrophic operational risks before they detonate. My core argument is that the mitigation and suppression of potentially
catastrophic operational risks require an active, human capital intensive inspection program. This discussion of operational risks within regulatory agencies is the first of its kind.
