Principles for the Sound Management of Operational Risk

The Basel Committee's Principles for the sound management of operational risk and the role of supervision describe eleven principles of sound operational risk management. These principles cover three main areas: (i) governance; (ii) the risk management environment; and (iii) the role of disclosure. 

Operational risk is inherent in all banking products, activities, processes and systems, and the effective management of operational risk has always been a fundamental element of a bank's risk management programme. As a result, sound operational risk management is a reflection of the effectiveness of the board and senior management in administering its portfolio of products, activities, processes, and systems. The Committee, through the publication of this paper, desires to promote and enhance the effectiveness of operational risk management throughout the banking system. 

This document updates the Committee's 2003 publication Sound Practices for the Management and Supervision of Operational Risk and reflects the evolution in operational risk management in the intervening years. A consultative version of this report was issued for public consultation in December 2010. The Committee appreciates the constructive comments received and thanks those who have taken the time and effort to express their views on the consultative document.