In other instances, members of the boards of directors that help to oversee community banks are heavily involved in the business of agriculture. These close connections to local agricultural businesses provide community banks with a unique and important perspective in helping to meet local agricultural credit needs.
However, these informal frameworks are undocumented, lack consistency and do not provide desired level of assurance to senior management or regulators. Thus, it is necessary for risk managers to develop awareness of operational risk and effectively use the emerging management techniques. Under the traditional approach of managing operational risk, the focus has largely remained on protecting the risk of loss of capital through insurance.