The inclusion of Operational Risk, a fundamental improvement over Basel I, captures risks associated with bank’s internal control processes and systems and corporate governance policies and practices. Operational risk calculation explicitly requires capital for “the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events” risk. This definition includes legal risk, but excludes strategic and reputational risk.
I have explained the current state of the economy, the baseline scenario of the outlook, and associated risks by region – namely, the United States, Europe, and emerging economies. The Bank projects that the global economy as a whole is likely to continue realizing relatively high growth led by growth in emerging and commodity-exporting economies.