systems or from external events. examples of operational risk include employee fraud, customer lawsuits, failed information system conversions, and mis - sent wires. operational risk has always been part of banking. but the greater variety of products and services that banks provide, the evolution of business processes, and changes in the ethical environment in which we live have all contributed to more observable exposures to this type of risk. an example of this is the growing use of automated loan underwriting systems. when individual loan officers are responsible for making lending decisions within established credit guidelines, unexpected losses tend to be concentrated. that is, if a particular loan officer is a weak underwriter, only the portion of the loan portfolio generated by that individual shows higher delinquencies and charge - offs. management could address this risk in many ways, including by providing additional training for that loan officer and by increasing loan - review activities. today, many lending decisions are made by automated systems. if the model used for underwriting has a weakness, a systemic asset - quality problem can arise. that is, higher delinquencies are no longer isolated in a small portion of the portfolio managed by one loan officer. instead, significant losses can occur simultaneously across the bank's loan portfolio. avoiding the problems of " model risk " requires more - rigorous oversight of internal controls. the model should be back - tested to verify that the factors it uses deliver the level of losses that was assumed when the loans were made and priced. avoiding model risk also requires greater data integrity in loan application and underwriting systems, as data errors can also contribute to unintended results. many banks today use credit - scoring models to help in mortgage and consumer credit originations. although most of these models have been shown to be effective in the past few years they have been in use, they have not been tested through a serious consumer - led recession. in the last recession, the weaknesses in asset quality were - and have been since - on the commercial loan side rather than the consumer side. during the period, consumer disposable income continued to grow. the test of the models will come when we hit a period of significantly higher unemployment or falling incomes. then we'll be able to see if the credit models have reliably predicted the credit losses. reputational risk another area of risk that has received attention because of recent events is reputational risk. bankers know that a critical element of success is customer and investor perceptions of the organization's

the great advantage that the common agricultural policy, with its high price approach to protecting the farm sector in europe, was ( on balance ) hugely advantageous to ireland. but in addition, irish negotiators were quick to understand the dynamics of european integration and saw that development of the european union through from the 70s to the 90s was something that could be good for all, but especially good for ireland, and so it was. garret wrote “ the benefits accruing to ireland from ec membership were immense – far greater in relation to the size of the economy than was the case for any other member state. this was true in relation to the impact on agriculture and the net flow of structural funds, but most of all in relation to the expansion of exports ”. it would be hard to disagree. already by 1990, though the tendency for irish political debate to take europe for granted, and to focus more and more on the scale of net fiscal transfers to ireland as the measure and goal of ireland ’ s diplomatic interaction with european partners degraded the quality of public discourse in ireland about europe and the stridency of irish demands began, in garret ’ s view, to grate on some other european leaders. though garret was firing on all cylinders when, for example, he worked to ensure a formula for regional fund allocations that would not channel so much of the money back to the core countries, the beal bocht was nowhere in his approach. too little, in his view, was done, to explain to the irish electorate the benefits of the union and in particular the traps and false directions that had been avoided in the design of successive treaty amendments ( a favourite rhetorical device this of garret ’ s “ if it hadn ’ t been for the treaty of x – or the budget of y – things would have been completely different and much worse! ” ) given the change in the size and character of discussions today, the challenge for those wishing to further national interests in europe is thus rather different to what it used to be. a naive approach confined to a battle over the redistribution of economic resources risks being, not even a zero sum game, but destructive all around. now, more than ever, policymakers need to look to the collective prosperity of the union as a whole, as well as to the individual components of which it is formed. centralisation or intergovernmentalism this, of course, was already the modus operandi of garret and the early irish ne