A structured approach to operational risk management in a banking environment
Operational risk was identified as one of the primary risk types that a bank faces. Neglected for many years, there is a growing awareness in the banking industry that the management of operational risk is crucial for their future existence. The effective management of operational risk, however,...
| Main Author: | |
|---|---|
| Other Authors: | |
| Format: | Others |
| Language: | en |
| Published: |
2009
|
| Subjects: | |
| Online Access: | Young, Jacobus (2009) A structured approach to operational risk management in a banking environment, University of South Africa, Pretoria, <http://hdl.handle.net/10500/690> http://hdl.handle.net/10500/690 |
| Summary: | Operational risk was identified as one of the primary risk types that a bank faces.
Neglected for many years, there is a growing awareness in the banking industry
that the management of operational risk is crucial for their future existence. The
effective management of operational risk, however, requires a structured
approach. This study, therefore, investigates the management of operational risk
by way of a literature study and empirical research in order to develop a
framework for a structured approach to operational risk management in banking.
The framework comprises the primary risk factors of operational risk, namely:
people, processes, systems and external events, as well as a definition of
operational risk. The operational risk exposures that apply to the aforementioned
primary risk factors are identified. It, furthermore, illustrates that operational risk
management is an ongoing process that consists of risk identification, risk
evaluation, risk control and risk financing and addresses the methods that could
be applied in the management process.
As operational risk management in the banking industry is still in a development
stage it is believed that this study could assist banks with establishing formal
operational risk management processes.
The framework demarcates the area of operational risk properly and provides
insight into all the activities that should be performed in the operational risk
management process, but the following issues still require further research:
• The practical implementation of methods for the quantification of
operational risk and determining a capital charge for it;
• The effect of the requirements of corporate governance on banks
as it relates to the management of operational risk; and
• The interaction between operational risk and the other primary
risk types to ensure an effective, enterprise-wide risk management
process.
The framework that has been developed could also be applied to any other
enterprise as operational risk management is not unique to banks and the basic principples are generic. === Business Management === D. Com. (Business Management) |
|---|