I accept Scott Randall’s point. I hope my previous comment did not imply that we need to build all the needed tools from scratch. In fact, I have repeatedly emphasized that the financial sector has a great deal to learn from the manufacturing sector and their significant strides in total quality management. I think that there should be greater emphasis on what I call Detailed Risk Indicators (DRIs) and not just Key Risk Indicators. That said, more monitoring of detailed risk indicators will only make practical sense if linked to the type of automated screening tools used in statistical process control. (See: http://www3.sungard.com/SunGardFinancial/menus/documents/risk_managers/200310%20statistical%20process%20control.pdf )

After years of careful attention to risk and control self-assessment and monitoring operational risk indicators as well as losses, we may eventually have sufficient data to link this dimension of operational risk management to the probability distribution of losses. Even before then, however, applying the lessons of statistical process control should help to reduce errors in execution and limit the number and impact of operational failures.