Principles for the Sound Management of Operational Risk (FRM Part 2 2023 – Book 3 – Chapter 1)

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After completing this reading, you should be able to:
Describe the three “lines of defense” in the Basel model for operational risk governance.
Summarize the fundamental principles of operational risk management as suggested by the Basel Committee.
Explain guidelines for strong governance of operational risk and evaluate the role of the board of directors and senior management in implementing an effective operational risk framework.
Describe tools and processes that can be used to identify and assess operational risk.
Describe features of an effective control environment and identify specific controls that should be in place to address operational risk.
Explain the Basel Committee’s suggestions for managing technology risk and outsourcing risk.