The role of operational risk events database in bank risk management
Subject Areas : Risk ManagementSamane Shafiee 1 , Mohammad Hamed Khan Mohammadi 2 , Ahmad Karami 3 , Majid Ghoroghi 4
1 - Department of Accounting, Damavand Branch, Islamic Azad University, Damavand, Iran.
2 - Department of Accounting, Damavand Branch, Islamic Azad University, Damavand, Iran.
3 - Department of Accounting, Damavand Branch, Islamic Azad University, Damavand, Iran.
4 - Department of Financial Management, Damavand Branch, Islamic Azad University, Damavand, Iran.
Keywords: capital adequacy, Database of operational risk events, Loss threshold, Operational risk management,
Abstract :
Purpose: In order to manage operational risks as one of the most important risks of the banking system, it is important to create a comprehensive database of operational risk events. Therefore, the aim of the current research is to investigate the requirements and framework of creating such a database in order to prevent the occurrence of future harmful events and, as a result, manage operational risks.Methodology: First, the operational risk framework and the general definition of each of the blocks of the framework including internal and external loss data, risk self-assessment and control, scenario analysis and key risk indicators were presented. Then, the internal loss data was further investigated, and the legal requirements regarding the necessity of creating a comprehensive database of risk events to calculate the capital required to cover the operational risk were raised.Findings: Database of operational risk events in order to meet the bank's risk management goals, it should have certain characteristics such as comprehensiveness, threshold, type of event at two levels, the amount of gross loss of the event, indirect costs, amount savings, profit, opportunity cost, Be close to losses, accounting adjustments, date, cause and description, business lines, currency type and border risk. Also in any organization, business sector He is responsible for the risks associated with his activities. After aggregation, the mentioned risks are reported to the bank's board of directors for decision making.Originality / Value: Creating a comprehensive database of operational risk events in banks, while recognizing these events and adopting appropriate strategies to prevent these events from occurring in the future, leads to the accurate calculation of the amount required to cover operational risks and achieve capital adequacy goals. It is desired by the central bank.
