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Seven pitfalls for Basel II operational risk implementation

BearingPoint, one of the world's largest business consulting and systems integration firms, has issued a white paper, "Seven Pitfalls In Basel II Operational Risk Implementation," detailing the steps companies need to avoid in complying with the still-evolving requirements of Basel II.

The paper addresses the fundamental issue that while Basel II is moving banks and other financial services companies to explicitly identify, measure and report information related to operational risk, what Basel II will precisely require still remains a work in progress.  Institutions are being directed to meet compliance deadlines as regulations are still being written, leaving them uncertain whether the approaches they take and the expenditures they make will ultimately be within the rules.

"Institutions intend to comply with Basel II, but today they are not sure what compliance means, or what value they will derive from the substantial efforts needed to attain compliance," says Bjorn Pettersen, a Managing Director with BearingPoint.  "Nonetheless they proceed so that they do not fall behind. This paper can help companies avoid seven operational risk pitfalls that financial institutions should consider as they follow Basel II compliance."

The seven pitfalls are:

* Waiting for the regulators to provide detailed guidance and lay out an implementation road map.

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