The role of operational risk and strategic risk in the enterprise risk management framework of financial services firms

The article distinguishes strategic risk from operational risk and discovered that the true causes of operational losses of financial services firms are originated from strategic failures. Whilst broadening the concept of operational risk, the study suggests that financial firms should emphasis more in the area of strategic risk management. It is further proposed that holding capital against operational loss exposures should be done simultaneously with organisations' risk mitigation functions while consistently searching the causes that trigger operational losses. This study provides new thinking of operational risk management focusing more on the causes rather than the financial impact.