The Monitoring System Simulation Study Of Operational Risk In China Medium Sized Commercial Bank

As the third type of risk in the field of commercial bank risk management, operationalrisk has caused worldwide concern since it was been put forward in1998. BaselCommittee issued the New Basel Agreement in2004. The way how to define and measurethe operational risk has been universally acknowledged by this area. In order to control riskmore accurately, scholars devote for a long time abundantly to operational risk capitalallocation and process of risk management. However, it is worthwhile to note that theresearch in these two directions is very limited from the view of evident endogenouscharacter of operational risk.Based on the endogenous character, this paper carries out a new idea, analyzes thegeneration theory, transmission mechanism and feedback influence of operational risk fromthe view of systems dynamics. To make the model more accurately, we divide Chinacommercial bank from business scale, profitable level, assets quality, corporate strategicand developmental direction. Then construct model based on the medium sizedcommercial bank. Statistics analysis shows that the most likely risk event is Treacheryfrom within; the most likely risk business line is bank loans. This paper constructs theoperational risk systems dynamics model and simulates the staff subsystem. The model cansimulate the mechanism of staff subsystem effectively, embodies the China medium sizedcommercial bank risk conditions. In the end of this paper, two suggestions are proposedaccording to the research results.This paper proposes two innovations: bank supervision and constructing the model bydivision of bank industry; operational risk management with systems dynamics. We hopethis paper can provide a new thought to this field.