In conclusion, operational risk management has always been an important banking concern. Traditionally, information technology has been a significant focus of operational risk management. However, evolving risks in bank operations and payment systems have brought increased attention to these areas. Consequently, operational risk management is often performed on an enterprise-wide basis.

Today, there is more formality in banks’ efforts to identify, assess, control and monitor operational risks to better manage them. Banks use business continuity planning in instances where operational risks remain outside bank control and can’t be mitigated through other means, such as internal controls, insurance, pricing for risk or risk sharing.

Good directors ask meaningful questions that help them understand bank matters. They also follow up with management by checking on the status of actions to be taken and, of critical importance, they hold management accountable for completing tasks and addressing problems in a timely fashion.

At Insights Bank and Trust

Board Chairman and Bank President Hi McCard has probably learned a valuable lesson from the incident. The bank’s and John’s personal reputation are tarnished in the community. Because of this, the bank may lose trust business. Furthermore, because control problems were noted in the bank’s trust examination report and management took no action to address those problems, Hi sees a big fight with the bank’s insurance company and a big legal bill. If the insurance company doesn't pay, Hi may have to personally make up the loss to keep the bank well capitalized.

The only bright spot in all of the trouble is Evelyn. The forensic accountant, Symington Bent, made glowing comments about Evelyn. Her experience as a trust officer at another bank and her understanding of the policies and procedures of Insights Bank and Trust make her the ideal candidate to address the Trust Department’s problems. Evelyn will provide stability to the department as other controls are implemented. His recommendation to the bank: “Make Evelyn the trust officer. She may be the ticket to getting the Trust Department back on track.”