Study On Operational Risk Management Of Rural Credit Cooperatives In China

In recent years, the operational risk cases in banking industry occur frequently, which has caused great losses to the banks. The operational risk in banking industry has brought extensive attention gradually from both domestic and abroad.At present, the operational risk exists both in international banks and domestic banks, which needs cautious preventions and controls. The operational risk hides in day to day operation, which is really hard to avoid. Because of the concealment of the operational risk, a neglect of a bank clerk might cause a great operational risk loss. The operational risk is hard to be found out in advance if a clerk seeks gains for himself by deliberately violating rules or collaborating with others. Most of the operational risk cases are found out after the events or after a long time. However, the loss has existed and some are hard to fix. Because of the concealment of the operational risk, the banking industry paid a close attention on management of the market risk and credit risk, neglecting the management of the operational risk. In recent decades of years, the frequent occurrences of operational risk cases have brought the attention to it. People start to notice the operational risk. However, the study of the operational risk in still on a primary stage since the research started late. That's why each bank needs to enforce the management and the study of the operational.The losses made by the operational risk happen in our domestic banks, too. The Chinese rural credit cooperative is a special financial organization. Its development has been relatively rough and its management system has been revised many times. So far, Chinese rural credit cooperatives haven't got clear property rights or perfect corporate management structure. The operational risk hasn't been emphasized in a long time as it should be. The rural credit cooperatives need to enforce the management and the study of the operational risk because of the frequent occurrences and the loss brought to our rural credit cooperative system.In this paper, the author starts from the management of the rural credit cooperatives, exploring the general rules by studying the basic definition, the classification and the characteristics of operational risks. Then, the author studies the present situation of the operational risk management of the rural credit cooperatives, the characteristics of the operational risk management and the reasons that the operational risk exits. There is a preliminary understanding of operational risk management of rural credit cooperatives, state and problems. After that, the author statistically analyzes the operational risk of the rural credit cooperatives by presenting all the cases caused by operational risk in rural credit cooperatives from 2000 to 2011, which helps to learn more about the operational risk of rural credit cooperatives. And with the Buhlmann model, the author predicts the operational risk estimates of the rural credit cooperatives. Then the author analyzes some chosen domestic and international operational risk cases and studies the operational risk management structure of international banks in order to use the experience and lessons from both domestic and international banks on operational risk management as references to our rural credit cooperatives. Finally, the author proposes some suggestions and solutions to our rural credit cooperatives on dealing with operational risk, hoping that the current management situation on operational risk can be improved and the frequency occurrences of operation risk can be decreased.