A Study On Commercial Bank Operational Risk Management

Recent years, suffering from a series of operational losses has been attracting more and more attention both in China and the world. Many financial institutes and commercial banks have begun to focus on the operational risk and to carry out studies on it. Such studies include its expressions, inside causes, method of measurement, control and management framework etc.There is a common sense for banking risk management, that is, effect of risk management depends on the way how it deals with the riskiest point, which has became the operational risk. Today, commercial banks in China are also facing a great impact caused by the operational risk. Therefore, it is meaningful and practical to study on the operational risk management.With an introduction of operational risk control from western commercial banks, this article presents systematical information of the operational risk, including its identification, definition, features and general causes. Further introductions on common practice for operational risk regarding to the Basel Agreement, international commercial banks and general performance in China take the second part of this article. After the introduction, the majority of this article aims at the study on the operational risk management in China. It illustrates problems and causes of the risk, and then prepares suggestions for circumstance in China.In this article, one key point the author would like to emphasize is that personal factor is the most influencing major reason for the operational risk in China. So far those typical cases of banking operational risk have shown that personal factor becomes the biggest trigger for the risk. Such cases are strongly linked with moral hazard of some managers and officers who cheat in their work or commit illegal crimes with someone outside bank. Therefore, the suggestion for the operational risk management for China commercial bank is to enhance employment management, including personal moral education, general capability and appropriate improvement system etc.