The events surrounding the recent banking crises have shown that many firms have underestimated their exposure to risk, including their operational risks such as fraud, improper business practices and system or processing errors.

In response, the industry and regulators have enhanced some existing risk management techniques regarding scenario analysis, stress testing and reverse stress testing. Although various regulatory bodies have published guidance, industry practices are still developing. The purpose of this Sound Practices Guidance is to provide Operational Risk Managers with insights as to how to undertake these risk management activities more effectively, and also how they should be linked together.