Who knows what the future holds? While the U.S. Department of Homeland Security is actively investigating terrorist communications and activity to prevent possible attacks, insurers are beginning to understand the necessity of taking a new, more proactive approach to assessing their own risks of loss related to people, processes, technologies or external events.These "operational risks," as defined by the Bank of Inter-national Settle-ment (BIS) in its proposed Basel II accord, are exemplified by events and failures such as Enron and WorldCom, the power outage in the Northeast last summer, the continual stream of computer viruses infesting the Internet, and, of course, the September 11 terrorist attacks.
But operational risks also include every day "failures," such as employee errors, system downtime and the loss of key talent. All in all, 90% of 435 financial services firms recently surveyed by SAS, a business intelligence provider with U.S. offices in Cary, N.C., say they lose $10 million per year through poor operational risk management, and 35% lose as much as $120 million per year.
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