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OM-1.1.1

This chapter contains the requirements relating to operational risk management. It sets out the requirements for an appropriate risk management environment. Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems including internal frauds, or from external events including external frauds. This definition includes legal and Shari'a non-compliance risks, but excludes strategic and reputational risk. Legal risk is the risk arising from the potential that unenforceable contracts, lawsuits or adverse judgments may disrupt or otherwise negatively affect the operations or financial condition of a bank. As legal risk is one type of operational risk, banks should ensure that all requirements included in this Module are also applied to the management of legal risks requirement.

Added: January 2020