IMPORTANCE AND TREATMENT OF OPERATIONAL RISKS IN BANKING MANAGEMENT

Expert contributions
Autor: Olivija Filipovska MSc

Summary: International banking flows and their stochastic correlation mutually intensify the transmission of risk and generate the need for an integrated management approach. Monitoring of risks at the aggregate level and perception of their course, trends and mutual interaction and intensification is a must. For the purpose of analysing individual risks, despite the absence of an adequate, generally accepted capital agreement, it is necessary to monitor these risks separately and thus find, implement and perfect the methods and techniques for their optimization. Operational risk is inherent to all banking operations. The processes of banking liberalization and globalization have directly intensified the importance and potential of operations. Operational risk exposures are disproportionately distributed per business lines, and at the same time, this distribution bears significant specificities depending on the type and size of a bank. This raises the issue of the bank’s risk profile and adequate treatment of operational risk. Differentiation between traditional and modern banking is the key issue when determining the bank’s risk profile, whereas when it comes to operational risk treatment, in general, there are three alternative ways: complete avoidance, reduction and diversification, and risk-taking. In order to achieve higher efficiency in banking risk management, the topics to be considered are the upgrade of Basle II Accord and establishment of additional requirements for the adequate treatment of all risks.

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