Playing partners: historically, Wachovia Corp. had looked at risk by line of business. After its merger with First Union, management decided to develop a more holistic approach. Finding the most effective solution was as complex a process as the merger itself--but well worth the effort.(Special Report)

A corporate-wide view of operational risk is a relatively new discipline in the financial services industry. Operational risk is broad, pervasive and complex--including losses incurred from human error, failed processes, inadequate systems or external events. Failure to manage operational risk appropriately can result in financial loss, negative customer impact and significant damage to a firm's reputation.

Wachovia Corp., the fourth largest banking corporation in the nation, has been lauded for its effective management of operational risk during the First Union and Wachovia bank merger announced in 2001. The company decided to proactively manage the risks associated with the large and complex merger in a way that would minimize customer impact and continue to build shareholder value.

"Today's Wachovia is financially strong and focused on execution," says Ken Thompson, Wachovia chairman and CEO. "Our deliberate integration activities for the past two and a half years have allowed us to build the company we envisioned and position it for the future."

The bank merger also gave Wachovia an opportunity to build a strong and independent risk management arm to oversee governance processes for credit, market and operational risk. A major piece of this work was creating a framework to manage operational risk at the enterprise level, including governance structure, processes and technology infrastructure.

A HOLISTIC APPROACH