Definition of Operational Risks
Operational risks are risks due to inadequate internal processes and systems, failures to properly manage employees, or external events, which could hinder an organization’s achievement of its goals, cause it financial losses, or damage its reputation.
Management of Operational Risks
The Bank of Korea manages operational risks using a 3-Lines of Defense model.
Operational Risks Management
Each Business Area as the 1st line of defense appoints as its operational risk manager a Deputy Director General, under whose supervision management activities are carried out to identify and prevent potential risks in advance, and to ensure the capacities for rapid response in cases of emergency.
As the 2nd line of defense, the centralized unit(Operational Risk Team) established in the Planning & Coordination Department handles Bank-wide Operational Risks and Business Continuity Management in support of the decision-making and business performances of the Executive and each 1st line of defense business area.
The Audit Department, the 3rd line of defense, performs the role of assuring the adequacy of risk management and internal controls at the levels of the 1st and 2nd lines of defense through internal audits.