Implementation of Operational Risk Regime: A Case of Commercial Banks in Pakistan

Hussain, Zahir and Ali, Syed Babar (2009): Implementation of Operational Risk Regime: A Case of Commercial Banks in Pakistan.

Abstract

We attempt to study the developmental phase of the operational risk regimes of Basel II implementation by the commercial banks of Pakistan. We used survey method to collect the data from the 12 selected banks. Operational risk managers were contacted to collect primary data through a structured questionnaire.

We conclude that the commercial banks are equipped well enough for the implementation of operational risk. Among others, approaches like the development of Know Your Customer form, development of soft wares and the increasing role of risk analysts ae used by the bank to manage the operational risk. Banks have been able to identify the key risk indicators for the operational risk such as volume of trades processed, volatility in profit and loss, employee turnover, and average overtime per employee etc. Because of the identification of these factors banks are now able to enhance the overall productivity of the organization. It is, nevertheless, still difficult for the banks to manage that part of operational risk which arises from the external factors.

• Item Type: MPRA Paper
• Language: English
• Keywords: Operational Risk, Risk Management, Operational Risk of Commercial Banks
• Subjects: G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G1 - General Financial Markets > G19 - Other; G - Financial Economics > G2 - Financial Institutions and Services; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G29 - Other

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