Mastering operational risk

Preface - Second Edition

A few months after the first edition had gone to press the Eyjafjallajökull volcano erupted causing widespread disruption to air travel and the Gulf of Mexico oil disaster began. A few months after the book appeared, the Japanese earthquake and tsunami caused the Fukushima nuclear disaster. All significant operational risk events and reminders of the scale of the problems which operational risk managers have to face and the scope of operational risk itself.

The events themselves form case studies in this second edition, which has been both updated and revised. The main revisions include raising the difficult issue of operational risk appetite to a chapter in its own right, bringing in thoughts on qualitative modelling in the chapter on Modelling and also revising the chapter on Stress tests and scenarios. The first edition consistently made the point that the fundamental causes of most operational risk failures are down to human factors, in other words people risk. That in turn is often a reflection of the culture of the firm in which people work and so we have expanded the People Risk chapter to one entitled Culture and people risk and given guidance on how to embed the right operational risk culture.

As with the first edition, we have been supported and encouraged by many friends and colleagues, some of whom have been kind enough to provide invaluable advice and suggestions, with especial thanks on this occasion to John Barlow, Garry Honey and Charlotte Kiddy. Special thanks as well to the team at Pearson, led by our editor, Eliose Cook, for all their guidance and support. As ever, any errors or omissions are entirely our own.

We have been both delighted and encouraged by the many people who have told us how much the book has helped them as a practical guide to operational risk management which, after all, is what we set out to do. We hope that this second edition is just as practical and just as helpful.

How to buy

Paperback and e-book versions in English: - for 35% discount

Paperback version in Chinese:
Posts & Telecommunications Press (

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