Loan administration is an area where a bank could suffer a significant financial loss from the lack of appropriate segregation of duties or dual controls, as well as incur considerable damage to its reputation if operational risk factors are not properly mitigated.
One should also keep in mind that, besides the modest weakening in fundamentals, investment booms are naturally followed by some slowdown as firms reach their desired level of capital. However, even taking all these factors into account, the fact is that standard investment models missed much of the drop in investment that began in 2000.