Within the banking sector operational risk is often perceived to be a less <p> important risk than financial risks such as market or credit risk. Such a view <p> is typically reinforced by the observation that banks are in the business of <p> taking these financial risks and must lend large amounts of money and/or take <p> significant market positions if they are to make an acceptable profit for their <p> owners. <p> Events such as the global financial crisis would also seem to reinforce this <p> view of the pre-eminence of financial risks. Taken at face value the crisis <p> might appear to have been caused by a combination of excessive lending, leverage <p> and derivatives trading - activities which fall with the realm of financial <p> risk. Yet deeper investigations into the crisis have revealed that other more <p> complex forces were at work, forces, such as failures in people, process and <p> systems which have more in common with the field of operational risk. <p> In this paper we argue that banks must do more to wake the sleeping giant of <p> operational risk management in their activities. We demonstrate how operational <p> risk related failures in people, processes and systems lay at the heart of the <p> global financial crisis, leading to disastrous consequences not only for <p> individual banks, but also for the financial sector as a whole and the domestic <p> economies that are supported by it. We also highlight three key barriers that <p> we believe are preventing the discipline of operational risk management from <p> reaching its full potential in the banking sector. Finally we identify a number <p> of themes that we believe should be embraced by banks and their regulators to <p> help overcome the three barriers and enhance the management of operational risk <p> across the sector.
