From The Perspective Of Internal Control Bank Operational Risk Management

Risk management lies at the heart of the financial industry. Since late 90s, operational risk has become the hot topic for foreign banks and financial supervisors. The"Basel II Capital Accord of 2004"set guidelines on capital requirements for operational risk, which promoted the development of operational risk management. In China, most Chinese commercial banks didn't pay much attention to operational risk management until the early of 2005 when many large financial cases were reported. Their focus on credit risk management and lack of scientific operational risk management are the main reasons for those cases. In order to reduce such cases and improve the competitiveness of Chinese commercial banks, they should take operational risk as an important risk type. They have to make great efforts to find the most suitable method to manage operational risk.I think that internal control is the key to manage the operational risk of commercial bank。This paper is aimed to provide a systematic operational risk management framework to Chinese commercial banks from the view of internal control. On the basis of 118 operational risk cases from Chinese commercial banks, this paper first analyzes the characteristics of the operational risk in China, then it discusses the relationship between operational risk and internal control.. In light of the approaches in Basel II and the current overseas experience, this paper provides the collectivity design to the internal control of operational risk management, which is my new idea. Aiming for strengthening and promoting the operational risk management of banking, Firstly, the three greatest organization structure systems including the performance system, the decision system, the supervision- feedback system are means to guarantee the effectiveness of the operation risk control. Secondly, The three concentrations of business process including the business operation concentration, the loan management concentration, the backstage management concentration are very important to ensure the realization of the control goal; Thirdly, The comprehensive risk assessment is very critical to improve the efficiency and effect of operational risk control; Fourthly, a good information system is helpful to improve the efficiency of operation risk control; Fifthly, The advanced IT terrace is a guarantee of the operation risk control. In order to ensure the real execution of operation risk control and good effect, it is necessary to strengthen the supervision and assessment of the inside and outside and emphasize the independence and authority of internal control organization.As a whole, Chinese commercial banks should improve their operational risk culture, internal control, operational risk management structure and techniques so as to build a sound operational risk management system.