These capital inflows were not always productively used. In some cases, for example, developing-country governments borrowed to avoid necessary fiscal consolidation; in other cases, opaque and poorly governed banking systems failed to allocate those funds to the projects promising the highest returns.
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.