Operational Risk Monitoring and Control

  • Douglas Robertson


The sampling and verification methodology is really just an application of conventional risk-assessment and quality control practices to mortgage lending and the mortgage securitization process. Looking back, a risk assessment that could have limited or even prevented the subprime mortgage crisis would have involved recognizing that bad subprime lending is a potentially catastrophic operational risk and that following the loan-quality inspection steps described in chapter 3 could have educated the market regarding the quality of the mortgages it was originating. Looking forward, a risk assessment that can limit or even prevent future lending crises involves recognizing that bad lending of any sort, performed on a large enough scale, is a potentially catastrophic operational risk.


Control Chart Operational Risk Credit Score Loan Officer Loan Origination 
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    See Christopher Marshall, Measuring and Managing Operational Risks in Financial Institutions: Tools, Techniques, and other Resources (Singapore: John Wiley & Sons, 2001), 248–60Google Scholar
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    See Douglas Montgomery, Introduction to Statistical Quality Control, 7th ed. (Hoboken: John Wiley & Sons, Inc. 2013).Google Scholar
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    See Marco Bertoni, Giorgio Brunello, and Lorenzo Rocco, “When the Cat Is Near, the Mice Won’t Play: The Effect of External Examiners in Italian Schools,” Journal of Public Economics 104 (2013): 65–77.CrossRefGoogle Scholar
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    See Son Anh Le, Bruce Walters, and Mark Kroll, “The Moderating Effects of External Monitors on the Relationship between R&D Spending and Firm Performance,” Journal of Business Research 59 (2006): 278–87.CrossRefGoogle Scholar

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© Douglas Robertson 2016

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  • Douglas Robertson

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