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Operational Risk: By-Karishma Patel Girish Naik Amita Yadav Priyanka Vijayachandran Chintan Bhagat Utkarsh Ranjan

Operational risk refers to risks that are not related to financial, market, or systematic risks. It includes risks from internal failures, such as breakdowns in procedures, employees, or systems. Operational risk can affect client satisfaction, reputation, and shareholder value while increasing business volatility. Some examples of operational risks include internal and external fraud, workplace safety issues, problems with clients, products, physical damage to assets, business disruptions, and failures in execution, delivery, or management processes. Banks can manage operational risk using the Basic Indicator Approach, Standardized Approach, or Advanced Measurement Approaches as defined by Basel II.

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Girish Naik
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76 views5 pages

Operational Risk: By-Karishma Patel Girish Naik Amita Yadav Priyanka Vijayachandran Chintan Bhagat Utkarsh Ranjan

Operational risk refers to risks that are not related to financial, market, or systematic risks. It includes risks from internal failures, such as breakdowns in procedures, employees, or systems. Operational risk can affect client satisfaction, reputation, and shareholder value while increasing business volatility. Some examples of operational risks include internal and external fraud, workplace safety issues, problems with clients, products, physical damage to assets, business disruptions, and failures in execution, delivery, or management processes. Banks can manage operational risk using the Basic Indicator Approach, Standardized Approach, or Advanced Measurement Approaches as defined by Basel II.

Uploaded by

Girish Naik
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Operational Risk

ByKarishma Patel
Girish Naik
Amita Yadav
Priyanka Vijayachandran
Chintan Bhagat
Utkarsh Ranjan

Meaning
Operational riskis theriskthat is not inherent
in financial, systematic or market-widerisk. It is
theriskremaining after determining financing
and systematicrisk, and includesrisksresulting
from breakdowns in internal procedures, people
and systems.
Operational risk is a broad discipline, close to
good management andquality management.
Operational risks affect client satisfaction,
reputation and shareholder value, all while
increasing business volatility.

Some examples of operational risks:


(as per Basel II)
Internal Fraud - misappropriation of assets,
tax evasion, intentional mismarking of
positions,bribery.
External Fraud - theft of information, hacking
damage, third-party theft and forgery.
Employment Practices and Workplace
Safety - discrimination, workers compensation,
employee health and safety.

Clients, Products, and Business Practice - market


manipulation, antitrust, improper trade, product
defects, fiduciary breaches, account churning.
Damage to Physical Assets - natural disasters,
terrorism, vandalism.
Business Disruption and Systems Failures - utility
disruptions, software failures, hardware failures.
Execution, Delivery, and Process Management data entry errors, accounting errors, failed mandatory
reporting, negligent loss of client assets.

Methods of operational risk management:


(as per Basel II)

Basic Indicator Approach - based on annual


revenue of the Financial Institution.
Standardized Approach- based on annual
revenue of each of the broad business lines of the
Financial Institution.
Advanced Measurement Approaches- based
on the internally developed risk measurement
framework of the bank adhering to the standards
prescribed (methods include IMA, LDA, Scenariobased, Scorecard etc.)
Note: The Operational Risk Management
framework should include identification,
measurement, monitoring, reporting, control and

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