Operational Risk

<body onLoad="MM_checkPlugin('Shockwave Flash','','http://www.riskglossary.com/default_nofl.htm',false);return document.MM_returnValue" stylesrc="../_private/template.htm" bgcolor="#FFFFFF" link="#669933" vlink="#000000" alink="#000000"> <div align="left"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table1"> <tr> <td width="740"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" height="37" id="table2"> <tr> <td height="35" width="100%"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" id="table3"> <tr> <td width="100%" align="left" valign="top"> <p class="header_gold">Operational Risk</td> <td width="45" align="right" valign="bottom"> <map name="FPMap6"> <area href="http://www.contingencyanalysis.com" shape="rect" coords="1, 0, 44, 11" target="_top"> </map> <img border="0" src="../images/home.gif" usemap="#FPMap6" width="45" height="12"></td> </tr> </table> </td> </tr> <tr> <td width="100%" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td width="0%" valign="top" bgcolor="#FFFFCC"> <table border="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" cellspacing="1" id="table4"> <tr> <td width="0%" align="left" valign="top"> <p class="header2_black">Explained:<br> <img border="0" src="../images/blank_1x100.gif" width="100" height="1"></td> <td width="0%" align="left" valign="top"><p class="word_list"> <a href="#operational risks">operational risk</a><br> <img border="0" src="../images/blank_1x160.gif" width="160" height="1"></td> <td width="100%" align="left" valign="top"><p class="word_list"> <br> <img border="0" src="../images/blank_1x160.gif" width="160" height="1"></td> </tr> </table> </td> </tr> </table> <table border="0" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111" width="310" align="right" id="table5"> <tr> <td align="right" width="9" height="14"></td> <td width="300" height="14"> <font size="2"> </font><font size="4"> </font></td> </tr> <tr> <td align="right" width="9"> </td> <td width="300"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script>  </td> </tr> </table> <p class="body">The <a href="../articles/basle_committee.htm">Basel Committee</a> (<a href="#Basle Committee on Banking Supervision (June 2004)">2004</a>) defines <b><a name="operational risks">operational risk</a></b> as </p> <p style="margin-left: 15; margin-right: 10">the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. </p> <p>The committee indicates that this definition excludes systemic risk, <a href="../articles/legal_risk.htm">legal risk</a> and  reputational risk.</p> <p class="body">During the 1990s, financial firms and other <a href="../articles/corporation.htm">corporations</a> focused increasing attention on the emerging field of <a href="../articles/risk_management.htm">financial risk management</a>. This was motivated by</p> <p class="bullet_line_space"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>concerns about the risks posed by the rapidly growing <a href="../articles/exchange_traded.htm">OTC</a> <a href="../articles/derivative_instrument.htm">derivatives</a> markets;</p> <p class="bullet_line_space"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>publicized financial losses, including those of <a href="../articles/barings_debacle.htm">Barings Bank</a>, <a href="../articles/risk_management.htm">Orange County</a> and <a href="../articles/risk_management.htm"> Metallgesellschaft</a>;</p> <p class="bullet_line_space"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>regulatory initiatives, especially the <a href="../articles/basle_committee.htm">Basel Accords</a>.</p> <p class="body">During the early part of the decade, much of the focus was on techniques for measuring and managing <a href="../articles/market_risk.htm">market risk</a>. As the decade progressed, this shifted to techniques of measuring and managing <a href="../articles/credit_risk.htm">credit risk</a>. By the end of the decade, firms and regulators were increasingly focusing on risks "other than market and credit risk." These came to be collectively called operational risks. This catch-all category of risks was understood to include,</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>employee errors,</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>systems failures,</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>fire, floods or other losses to physical assets,</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>fraud or other criminal activity.</p> <p class="body">Firms had always managed these risks. The new goal was to do so in a more systematic manner. The approach would parallel—and be integrated with—those that were proving effective with market risk and credit risk.</p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="165" align="left" id="table6"> <tr> <td width="160"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td> <td width="11"> </td> </tr> </table> <p class="body">The task appeared daunting. Financial institutions and regulators had had to dedicate considerable resources to managing market risk and credit risk, and those were well-known, narrowly-defined risks. Operational risk was anything but well defined. People disagreed about the specific contingencies that should be considered operational risks—should legal risks, tax risks, management incompetence or reputational risks be included? The debate was more than academic. It would shape the scope of initiatives to manage operational risk.</p> <p class="body">Another problem was that operational contingencies don't always fall into neat categories. Losses can result from a complex confluence of events, which makes it difficult to predict or model contingencies. In 1996, the Crédit Lyonnais trading floor was destroyed by fire. This might be categorized as a loss due to fire. It might also be categorized as a loss due to fraud—investigators suspect employees deliberately set the fire in order to destroy evidence of fraud.</p> <p class="body">The Basel Committee outlined basic practices in a (<a href="#Basle Committee on Banking Supervision (April 2003)">February 2003</a>) paper <i>Sound Practices for the Management and Supervision of Operational Risk</i>. That paper, together with efforts by researchers and risk managers at major banks have helped to shape emerging risk management practices for operational risk.</p> <p class="body">Most operational risks are best managed within the departments in which they arise. Information technology professionals are best suited for addressing systems-related risks. Back office staff are best suited to address settlement risks, etc. However, overall planning, coordination, and monitoring should be provided by a centralized operational risk management department. This should closely coordinate with market risk and credit risk management departments within an overall enterprise risk management framework.</p> <p class="body">Contingencies broadly fall into two categories:</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>those that occur frequently and entail modest losses;</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>those that occur infrequently but may entail substantial losses.</p> <p class="body">Accordingly, operational risk management should combine both qualitative and quantitative techniques for assessing risks. For example, settlement errors in a trading operation's back office happen with sufficient regularity that they can be modeled statistically. Other contingencies affect financial institutions infrequently and are of a non-uniform nature, which makes modeling difficult. Examples include acts of terrorism, natural disasters, and trader fraud.</p> <p class="body">Qualitative techniques include </p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>loss event reports,</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>management oversight,</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>employee questionnaires,</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>exit interviews,</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>management self assessment, and </p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>internal audit. </p> <p class="body">Quantitative techniques have been developed primarily for the purpose of assigning <a href="../articles/capital_allocation.htm">capital charges</a> for banks' operational risks. Much work in this field was performed by regulators developing the <a href="../articles/basle_committee.htm">Basel II</a> accord on bank capital adequacy. Early results were reported in a (<a href="#Basle Committee">January 2001</a>) consultative document, which was included in a package of documents outlining the proposed Basel II accord. Extensive industry feedback on that document lead the committee to issue a follow-up (<a href="#Basle Committee on Banking Supervision (September 2001)">September 2001</a>) working paper on operational risk. A subsequent (<a href="#Basle Committee on Banking Supervision (April 2003)">April 2003</a>) consultative document made further modifications to Basel II. The final Basel II accord was released in <a href="#Basle Committee on Banking Supervision (June 2004)">2004</a>. </p> <p class="body">Basel II allows large banks to base operational risk <a href="../articles/capital_allocation.htm">capital</a> requirements on their own internal models. This has spawned considerable independent research into methods for measuring operational risk. Techniques have been borrowed from fields such as actuarial science and engineering reliability analysis. </p> <p class="body">Contingencies of an infrequent but potentially catastrophic nature can, to some extent, be modeled using techniques developed for property & casualty insurance. Contingencies that arise more frequently are more amendable to statistical analysis.</p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="345" align="left" id="table7"> <tr> <td width="336" height="10"><font size="2"> </font></td> <td width="9" height="10"></td> </tr> <tr> <td width="336"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script>  </td> <td width="9"> </td> </tr> </table> <p class="body">Statistical modeling requires data. For operational contingencies, two forms of data are useful:</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>data on historical <b>loss events</b>, and</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>data on <b>risk indicators</b>.</p> <p class="body">Loss events run the gamut—settlement errors, systems failures, petty fraud, customer lawsuits, etc. Losses may be direct (as in the case of theft) or indirect (as in the case of damage to the institution's reputation). There are three ways data on loss events can be categorized:</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>event</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>cause</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>consequence</p> <p class="body">For example, an event might be a mis-entered trade. the cause might be inadequate training, a systems problem or employee fatigue. Consequences might include a market loss, fees paid to a counterparty, a lawsuit or damage to the firm's reputation. Any event may have multiple causes or consequences. Tracking all three dimensions of loss events facilitates the construction of event matrices, identifying the frequency with which certain causes are associated with specific events and consequences. Even with no further analysis, such matrices can identify for management areas for improvement in procedures, training, staffing, etc.</p> <p class="body">The Basel Committee breaks down loss events into seven general categories:</p> <div align="center"> <center> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" id="table8"> <tr> <td> <p class="exhibit_header"><span class="exhibit_header">Categories of Loss Events</span><br> <span class="exhibit_subheader">Exhibit 1</span></td> </tr> <tr> <td bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td align="left" valign="top"> <table border="1" cellpadding="3" cellspacing="0" style="border-collapse: collapse" bordercolor="#000000" width="98%" class="explanatory_text" bgcolor="#FFFFCC" id="table9"> <tr> <td width="20%" bordercolor="#000000" align="center" bgcolor="#FFFFFF"> <p style="margin-top: 3; margin-bottom: 3"><b>Event-Type Category<br> (Level 1)</b></td> <td width="30%" bordercolor="#000000" align="center" bgcolor="#FFFFFF"> <p style="margin-top: 3; margin-bottom: 3"><b>Definition</b></td> <td width="20%" bordercolor="#000000" align="center" bgcolor="#FFFFFF"> <p style="margin-top: 3; margin-bottom: 3"><b>Categories<br> (Level 2)</b></td> <td width="30%" bordercolor="#000000" align="center" bgcolor="#FFFFFF"> <p style="margin-top: 3; margin-bottom: 3"><b>Activities Examples<br> (Level 3)</b></td> </tr> <tr> <td width="20%" bordercolor="#000000" rowspan="2" align="left" valign="top"> <font style="font-size: 9pt">Internal Fraud</font></td> <td width="30%" bordercolor="#000000" rowspan="2" align="left" valign="top"> <font style="font-size: 9pt">Loss due to acts of a type intended to defraud, misappropriate property or circumvent regulations, the law or company policy, excluding diversity / discrimination events, which involves at least one internal party.</font></td> <td width="20%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt">Unauthorized Activity</font></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Transactions not reported (intentional)<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Transaction type unauthorized (with monetary loss)<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Mismarking of position (intentional)</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt">Theft and Fraud</font></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font><span style="font-size: 9pt">Fraud / credit fraud / worthless deposits<br> </span><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font><span style="font-size: 9pt">Theft / extortion / embezzlement / robbery<br> </span><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font><span style="font-size: 9pt">Misappropriation of assets<br> </span><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font><span style="font-size: 9pt">Forgery<br> </span><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font><span style="font-size: 9pt">Check kiting<br> </span><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font><span style="font-size: 9pt">Smuggling<br> </span><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font><span style="font-size: 9pt">Account take-over / impersonation, etc.<br> </span><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font><span style="font-size: 9pt">Tax non-compliance / evasion (willful)<br> </span><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font><span style="font-size: 9pt">Bribes / kickbacks<br> </span><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font><span style="font-size: 9pt">Insider trading (not on firm's account)</span></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top" rowspan="2"> <font style="font-size: 9pt">External Fraud</font></td> <td width="30%" bordercolor="#000000" align="left" valign="top" rowspan="2"> <span style="font-size: 9pt">Losses due to acts of a type intended to defraud, misappropriate property or circumvent the law, by a third party</span></td> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Theft and Fraud</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font><span style="font-size: 9pt">Theft / robbery<br> </span><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Forgery<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Check kiting</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Systems Security</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Hacking damage<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Theft of information (with monetary loss)</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top" rowspan="3"> <font style="font-size: 9pt">Employment Practices and Workplace Safety</font></td> <td width="30%" bordercolor="#000000" align="left" valign="top" rowspan="3"> <span style="font-size: 9pt">Losses arising from acts inconsistent with employment, health or safety laws or agreements, from payment of personal injury claims, or from diversity / discrimination events.</span></td> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Employee Relations</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Compensation, benefit, termination issues<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Organized labor activities</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Safe Environment</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">General liability (slips and falls, etc.)<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Employee health & safety rules and events<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Workers compensation</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Diversity & Discrimination</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">All discrimination types</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top" rowspan="5"> <font style="font-size: 9pt">Clients, Products & Business Practice</font></td> <td width="30%" bordercolor="#000000" align="left" valign="top" rowspan="5"> <span style="font-size: 9pt">Losses arising from an unintentional or negligent failure to meet a professional obligation to specific clients (including fiduciary and suitability requirements), or from the nature or design of a product.</span></td> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Suitability, Disclosure & Fiduciary</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Fiduciary breaches / guideline violations<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Suitability / disclosure issues (KYC, etc.)<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Retail consumer disclosure violations<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Breach of privacy<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Aggressive sales<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Account churning<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Misuse of confidential information<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Lender liability</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Improper Business or Market Practices</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Antitrust<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Improper trade / market practice<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Market manipulation<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Insider trading (on firm's account)<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Unlicensed activity<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Money laundering</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Product Flaws</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Product defects (unauthorized, etc.)<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Model errors</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Selection, Sponsorship & Exposure</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Failure t investigate client per guidelines<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Exceeding client exposure limits</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Advisory Activities</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Disputes over performance or advisory activities</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt">Damage to Physical Assets</font></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Losses arising from loss or damage to physical assets from natural disaster or other events</span></td> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Disasters and Other Events</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Natural disaster losses<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Human losses from external sources (terrorism, vandalism)</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt">Business Disruption & Systems Failures</font></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Losses arising from disruption of business or system failures</span></td> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Systems</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Hardware<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Software<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Telecommunications<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Utility outage / disruptions</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top" rowspan="6"> <font style="font-size: 9pt">Execution, Delivery & Process Management</font></td> <td width="30%" bordercolor="#000000" align="left" valign="top" rowspan="6"> <span style="font-size: 9pt">Losses from failed transaction processing or process management, from relations with trade counterparties and vendors</span></td> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Transaction Capture, Execution & Maintenance</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Miscommunication<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Data entry, maintenance or loading error<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Missed deadline or responsibility<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Model / system misoperation<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Accounting error / entity attribution error<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Other task misperformance<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Delivery failure<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Collateral management failure<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Reference data maintenance</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Monitoring & Reporting</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Failed mandatory reporting obligation<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Inaccurate external report (loss incurred)</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Customer Intake & Documentation</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Client permissions / disclaimers missed<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Legal documents missing / incomplete</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Customer / Client Account Management</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Unapproved access given to accounts<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Incorrect client records (loss incurred)<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Negligent loss or damage of client assets</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Trade Counterparties</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Non-client counterparty misperformance<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Misc. non-client counterparty disputes</font></td> </tr> <tr> <td width="20%" bordercolor="#000000" align="left" valign="top"> <span style="font-size: 9pt">Vendors & Suppliers</span></td> <td width="30%" bordercolor="#000000" align="left" valign="top"> <font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10">Outsourcing<br> <img border="0" src="../images/bullet.gif" width="20" height="10">Vendor disputes</font></td> </tr> </table> </td> </tr> <tr> <td> <p class="exhibit_legend">  Source: Basel Committee (<a href="#Basle Committee on Banking Supervision (February 2003)">February 2003</a>).</td> </tr> </table> </center> </div> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="345" align="right" id="table10"> <tr> <td align="right" width="9" height="10"></td> <td width="336" height="10"> <font size="2"> </font></td> </tr> <tr> <td align="right" width="9"> </td> <td width="336">  <p style="margin-top: 0; margin-bottom: 2" class="ad_legend"> <a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font color="#000000">Ads by Contingency Analysis</font></a></p> <p style="margin-top: 0; margin-bottom: 0"> <iframe src="http://servedbyadbutler.com/adserve/;ID=147917;size=336x265;setID=82402;type=iframe" style="margin: 0px; padding: 0px; border-width: 0px" width="336" height="265" frameborder="0" marginwidth="0" marginheight="0" scrolling="no" name="I1"> <![if lt IE 4]> <script src="http://servedbyadbutler.com/adserve/;ID=147917;size=336x265;setID=82402;type=js" type="text/javascript"> </script> <noscript> <a href="http://servedbyadbutler.com/go2/;ID=147917;size=336x265;setID=82402"> <img src="http://servedbyadbutler.com/adserve.ibs/;ID=147917;size=336x265;setID=82402;type=img" border="0" height="265" width="336" alt=""></a> </noscript><![endif]></iframe>   </td> </tr> </table> <p class="body">Risk indicators differ from loss events. They are not associated with specific losses, but indicate the general level of operational risk. Examples of risk indicators a firm might track are:</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>amount of overtime being performed by back-office staff,</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>staffing levels,</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>daily transaction volumes,</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>employee turnover rates,</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>systems downtime.</p> <p class="body">From a modeling standpoint, the goal is to find relationships between specific risk indicators and corresponding rates of loss events. If such relationships can be identified, then risk indicators can be used to identify periods of elevated operational risk.</p> <p class="body">Once operational risks have been—qualitatively or quantitatively—assessed, the next step is to somehow manage them. Solutions may attempt to </p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>avoid certain risks, </p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>accept others, but attempt to mitigate their consequences, or</p> <p class="bullet"><font style="font-size: 9pt"> <img border="0" src="../images/bullet.gif" width="20" height="10"></font>simply accept some risks as a part of doing business.</p> <p class="body">Specific techniques might include: employee training, close management oversight, segregation of duties, purchase of insurance, employee background checks, exiting certain businesses, and the capitalization of risks. Choice of techniques will depend upon a cost-benefit analysis. </p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table11"> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Related Internal Links</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" colspan="2"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="6" id="table12"> <tr> <td width="100%"> <p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/basle_committee.htm">Basel Committee</a> An international committee that has </strong> <span style="FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman">has played a leading role in standardizing bank regulations across jurisdictions.</span><p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/capital_allocation.htm">capital allocation</a> A process of choosing what ventures, deals or trades to engage in, usually based upon some cost or risk-return analysis.</strong><p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/credit_risk.htm">credit risk</a> Risk</strong> due to uncertainty in a counterparty's ability to meet its obligations.<p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/risk_management.htm">financial risk management</a> Practices by which a firm optimizes the manner in which it takes financial risk.<p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/legal_risk.htm">legal risk</a> Risk from uncertainty due to legal actions or uncertainty in the applicability or interpretation of contracts, laws or regulations.<p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/liquidity_risk.htm">liquidity risk</a> Risk due to uncertain liquidity.<p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/market_risk.htm">market risk</a> Exposure to the uncertain market value of a portfolio.<p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/model_risk.htm">model risk</a> The risk that models are applied to tasks for which they are inappropriate or are otherwise implemented incorrectly.</p> <p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/risk.htm">risk</a> Comprises two components: uncertainty and exposure.</strong></td> </tr> </table> </td> </tr> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Sponsored Links</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" width="75"> <img border="0" src="../images/ad_side_banner_2.jpg" width="103" height="285"></td> <td bgcolor="#FFFFCC" width="99%">  <p class="ad_legend" style="margin-left: 0; margin-bottom:2"> <a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font color="#000000">Ads by Contingency Analysis</font></a></p> <p style="margin-top: 0; margin-bottom: 0"> <iframe src="http://servedbyadbutler.com/adserve/;ID=147917;size=336x265;setID=82436;type=iframe" style="margin: 0px; padding: 0px; border-width: 0px" width="336" height="265" frameborder="0" marginwidth="0" marginheight="0" scrolling="no" name="I2"> <![if lt IE 4]> <script src="http://servedbyadbutler.com/adserve/;ID=147917;size=336x265;setID=82436;type=js" type="text/javascript"> </script> <noscript> <a href="http://servedbyadbutler.com/go2/;ID=147917;size=336x265;setID=82436"> <img src="http://servedbyadbutler.com/adserve.ibs/;ID=147917;size=336x265;setID=82436;type=img" border="0" height="265" width="336" alt=""></a> </noscript><![endif]></iframe>   </td> </tr> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Related Books</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" colspan="2"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="6" id="table13"> <tr> <td width="100%"> <p class="explanatory_text">Brink (<a target="_blank" href="http://www.riskbook.com/link/brink_g_(2002).htm">2002</a>) is a short, practical book that approaches operational risk from an entirely qualitative perspective. Cruz (<a target="_blank" href="http://www.riskbook.com/link/cruz_m_(2002).htm">2002</a>) is more theoretical, focusing on quantitative techniques for measuring operational risk. Risk Books (<a target="_blank" href="http://www.riskbook.com/link/risk_(2002)_operational.htm">2003</a>) is an excellent edited collection offering an all-encompassing treatment of the subject. Alexander (<a target="_blank" href="http://www.riskbook.com/link/alexander_c_(2003).htm">2003</a>) is an edited collection addressing operational risk primarily in the context of Basel II. </p> <table border="0" cellpadding="4" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table14"> <tr> <td width="100" align="left" valign="top"> <map name="FPMap418"> <area target="_blank" href="http://www.riskbook.com/link/brink_g_(2002).htm" shape="rect" coords="0, 0, 90, 124"> </map> <img border="0" src="../images/book_brink_g_(2002)_125.gif" usemap="#FPMap418" width="91" height="125"></td> <td align="left" valign="top"> <table border="0" cellpadding="1" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table15"> <tr> <td width="90%" colspan="3"> <p class="title"> <a target="_blank" href="http://www.riskbook.com/link/brink_g_(2002).htm"> Operational Risk</a></td> </tr> <tr> <td colspan="3"> <p class="author"><b>Gerrit Jan van den Brink</b></td> </tr> <tr> <td width="10%"> <map name="FPMap241"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map> <img border="0" src="../images/star_5.gif" usemap="#FPMap241" width="90" height="16"></td> <td width="10%" class="author">quality</td> <td width="70%"> <p class="author"> </td> </tr> <tr> <td width="10%"> <map name="FPMap415"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map><img border="0" src="../images/tech_2.gif" usemap="#FPMap415" width="90" height="16"></td> <td width="10%" class="author">technical</td> <td width="70%">  </td> </tr> <tr> <td width="10%"> <p class="author">2002</td> <td width="10%"> </td> <td width="70%"> <p align="center"><map name="FPMap366"> <area target="_blank" coords="0, 0, 145, 19" shape="rect" href="http://www.riskbook.com/link/brink_g_(2002).htm"> </map> <img border="0" src="../images/pointer_review.gif" usemap="#FPMap366" width="146" height="20"></td> </tr> </table> </td> </tr> </table> <table border="0" cellpadding="4" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table16"> <tr> <td width="100" align="left" valign="top"> <map name="FPMap419"> <area target="_blank" href="http://www.riskbook.com/link/cruz_m_(2002).htm" shape="rect" coords="0, 0, 82, 124"> </map> <img border="0" src="../images/book_cruz_m_(2002)_125.jpg" usemap="#FPMap419" width="83" height="125"></td> <td align="left" valign="top"> <table border="0" cellpadding="1" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table17"> <tr> <td width="90%" colspan="3"> <p class="title"> <a target="_blank" href="http://www.riskbook.com/link/cruz_m_(2002).htm"> Modeling, Measuring and Hedging Operational Risk</a></td> </tr> <tr> <td colspan="3"> <p class="author"><b>Margelo G. 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</table> <table border="0" cellpadding="4" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table20"> <tr> <td width="100" align="left" valign="top"> <map name="FPMap425"> <area target="_blank" href="http://www.riskbook.com/link/alexander_c_(2003).htm" shape="rect" coords="0, 0, 93, 124"> </map> <img border="0" src="../images/book_alexander_(2003)_125.jpg" usemap="#FPMap425" width="94" height="125"></td> <td align="left" valign="top"> <table border="0" cellpadding="1" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table21"> <tr> <td width="90%" colspan="3"> <p class="title"> <a target="_blank" href="http://www.riskbook.com/link/alexander_c_(2003).htm"> Operational Risk</a><br> <font size="2"> <a target="_blank" href="http://www.riskbook.com/link/alexander_c_(2003).htm"> Regulation, Analysis and Management </a></font></td> </tr> <tr> <td colspan="3"> <p class="author"><b>Carol Alexander (Ed.)</b></td> </tr> <tr> <td width="10%"> <map name="FPMap426"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map> <img border="0" src="../images/star_5.gif" usemap="#FPMap426" width="90" height="16"></td> <td width="10%" class="author">quality</td> <td width="70%"> <p class="author"> </td> </tr> <tr> <td width="10%"> <map name="FPMap427"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map><img border="0" src="../images/tech_2.gif" usemap="#FPMap427" width="90" height="16"></td> <td width="10%" class="author">technical</td> <td width="70%">  </td> </tr> <tr> <td width="10%"> <p class="author">2003</td> <td width="10%"> </td> <td width="70%"> <p align="center"><map name="FPMap417"> <area target="_blank" coords="0, 0, 145, 19" shape="rect" href="http://www.riskbook.com/link/alexander_c_(2003).htm"> </map> <img border="0" src="../images/pointer_review.gif" usemap="#FPMap417" width="146" height="20"></td> </tr> </table> </td> </tr> </table> </td> </tr> </table> </td> </tr> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Related Papers</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" colspan="2"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="6" id="table22"> <tr> <td width="100%"> <p class="explanatory_text"> <img border="0" src="../images/bullet_paper_glossary.gif" width="21" height="15"><a name="Basle Committee">Basel Committee</a> on Banking Supervision (January 2001). <a target="_blank" href="http://www.bis.org/publ/bcbsca07.pdf"> Consultative Document: Operational Risk</a>, Bank for International Settlements.<p class="explanatory_text"> <img border="0" src="../images/bullet_paper_glossary.gif" width="21" height="15"><a name="Basle Committee on Banking Supervision (September 2001)">Basel Committee on Banking Supervision (September 2001)</a>. <a target="_blank" href="http://www.bis.org/publ/bcbs_wp8.pdf"> Working Paper on the Regulatory Treatment of Operational Risk</a>, Bank for International Settlements.<p class="explanatory_text"> <img border="0" src="../images/bullet_paper_glossary.gif" width="21" height="15"><a name="Basle Committee on Banking Supervision (February 2003)">Basel Committee on Banking Supervision (February 2003)</a>. <a target="_blank" href="http://www.bis.org/publ/bcbs96.pdf">Sound Practices for the management and Supervision op Operational Risk</a>, Bank for International Settlements.<p class="explanatory_text"> <img border="0" src="../images/bullet_paper_glossary.gif" width="21" height="15"><a name="Basle Committee on Banking Supervision (April 2003)">Basel Committee on Banking Supervision (April 2003)</a>. <a target="_blank" href="http://www.bis.org/bcbs/cp3full.pdf"> Consultative Document: The New Basel Capital Accord</a>, Bank for International Settlements.<p class="explanatory_text"> <img border="0" src="../images/bullet_paper_glossary.gif" width="21" height="15"><a name="Basle Committee on Banking Supervision (June 2004)">Basel Committee on Banking Supervision (June 2004)</a>. <a target="_blank" href="http://www.bis.org/publ/bcbs107.pdf"> International Convergence of Capital Measurement and Capital Standards</a>, Bank for International Settlements. (This is the final Basel II Accord).</td> </tr> </table> </td> </tr> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Related Forum Discussions</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" colspan="2"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="6" id="table23"> <tr> <td width="100%"> <p class="explanatory_text"> <img border="0" src="../images/bullet_bullhorn_narrow.gif" align="left" width="27" height="22"><a target="_top" href="http://www.contingencyanalysis.com/archive/link_thread/05-4/00005103.htm">Trade Errors</a> <i>19 Oct 2005</i><br> Quantifying risk due to mistakes in trade execution.<p class="explanatory_text"> <img border="0" src="../images/bullet_bullhorn_narrow.gif" align="left" width="27" height="22"><a target="_top" href="http://www.riskarchive.com/link_thread/05-1/00000667.htm">Role of Operational Risk Management Staff</a><i> 27 Feb 2005<br> </i>Who actually "owns" operational risk?<p class="explanatory_text"> <img border="0" src="../images/bullet_bullhorn_narrow.gif" align="left" width="27" height="22"><a target="_top" href="http://www.riskarchive.com/link_thread/05-1/000005f3.htm">Correct a Model Error, or Improving a Model?</a> <i>10 Feb 2005<br> </i>Model error and operational risk management.<p class="explanatory_text"> <img border="0" src="../images/bullet_bullhorn_narrow.gif" align="left" width="27" height="22"><a target="_top" href="http://www.contingencyanalysis.com/archive/link_thread/04-1/000005f4.htm">Operational Risk Management</a> <i>20 Feb 2004</i><br> Challenges of quantifying operational risk.<p class="explanatory_text"> <img border="0" src="../images/bullet_bullhorn_narrow.gif" align="left" width="27" height="22"><a target="_top" href="http://www.contingencyanalysis.com/archive/link_thread/97-2/0000004e.htm">Modeling of Operational Risk</a> <i>21 Mar 1997</i><br> Debate about whether operational risks can or should be measured.</td> </tr> </table> </td> </tr> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Related External Links</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" colspan="2"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="6" id="table24"> <tr> <td width="100%"> <p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a target="_blank" href="http://www.orx.org/">http://www.orx.org/</a> is the website of an industry organization established <font face="Arial" size="2">for the exchange of operational risk related loss information among its members in a standardized, anonymous form.</font><p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><font face="Arial"><a target="_blank" href="http://www.bis.org">http://www.bis.org</a> is the website of the Bank for International Settlement, which sponsors the Basel Committee. The website has numerous documents related to operational risk, including many cited in this glossary article.</font></td> </tr> <tr> <td width="100%" bgcolor="#FFFFFF">  <p align="center"><map name="FPMap0_I1"> <area target="_top" href="http://www.riskglossary.com" shape="rect" coords="0, 0, 164, 102"> </map><img border="0" src="../images/logo.jpg" usemap="#FPMap0_I1" width="165" height="103"></p> <p align="center"><span class="verdana10"> <a href="http://www.riskglossary.com/main/disclaimer.htm">Disclaimer</a></span></p> <p align="center">website: <span class="verdana10"> <a target="_top" href="http://www.contingencyanalysis.com">http://www.contingencyanalysis.com</a></span><br> glossary direct link: <span class="verdana10"> <a target="_top" href="http://www.riskglossary.com">http://www.riskglossary.com</a></span><br> copyright © Contingency Analysis, 1996 - current</p> <p align="center"><map name="FPMap1_I1"> <area target="_top" href="http://www.contingencyanalysis.com" shape="rect" coords="0, 0, 240, 88"> </map><img border="0" src="../images/logo_glossary_white.gif" usemap="#FPMap1_I1" width="241" height="89"></p> </td> </tr> </table> </td> </tr> </table> </td> <td>  </td> </tr> </table> </div> </body>