v3319524 - Effectiveness of risk management, commercial banking ...

Commercial Bank of operational risk management effectiveness
?Keywords?  paper: risk management, commercial banks, the effectiveness of operational risk   ?Abstract?: For a long time, China's commercial banks for credit risk and market risk management more seriously, but for operational the definition and role of risk but there is misunderstanding. Commercial bank risk management, risk management system as the core of how to further improve management efficiency and enhance the effective capacity is increasingly showing its necessity. The modern concept of risk as the risk of loss may be a combination of profit opportunities, so the goal of operational risk management is not limited to the possible loss of control, but also including the use of profit opportunities, thus achieving the  financial  organizations realize the value of growth and enhance the core competitiveness of the ultimate goal. How effective operational risk management of commercial banks, the use of risk opportunity to create value for financial institutions and the formation of core competitiveness, the paper discussed.   First, commercial banks, the effectiveness of operational risk management content   operational risk, defined as the operation process is imperfect, people and systems or from external factors that caused economic loss. Traditionally, operational risk has long been defined as the addition to market risk, credit risk and liquidity risk in addition all the risk. New Capital Accord Basel Banking Committee defines operational risk as However, including legal risks.   Comprehensive view, the effectiveness of risk management, Hope to understand the premise of risk management   which in turn have an effect on what risk management objectives related to the problem. Traditionally, risk is defined as the loss of possible risk management objectives and thus to be understood accordingly as the possible loss of control, including reducing the likelihood and severity of the effect of risk management should be reflected in the potential loss of control and even eliminated.   (b) efficiency. Risk management to control the costs of potential losses should the economy is the key problem, however, these costs are. Management process is clearly human, financial, and material cost of resource consumption is an important part, but from the modern concept of view, this is not the cost of all. The risks and benefits match the market economy, to reduce the risk is correspondingly reduced profit opportunities and level of risk reduction may have to lose some customers and market share. Therefore, the cost of risk management, and also includes a lower level of profit opportunities, customers and reduced market share, and institutional capacity of business activity and reduced competition in the market and so on.   the modern concept of risk as the risk of loss may be a combination of profit opportunities, so the goal of operational risk management is not limited to the possible loss of control, but also including the use of profit opportunities, then reached for financial institutions realize the value of growth and enhance the core competitiveness of the ultimate goal. In this way, risk management,   banking is a high risk industry, risk prevention, management and resolution of the eternal theme of the development of the banking sector. June 26, 2004, the Basel Committee on Banking Supervision released the Of particular concern is that it included the operational risk management of minimum capital adequacy requirements within the framework of international banking operational risk measurement and management of the new requirements. Basel II regulatory capital adequacy to more accurately reflect the risk profile of banks, banking and financial regulatory authorities to provide more choice to measure the capital adequacy of the method, so that the framework of the Basel Committee's capital adequacy greater flexibility to adapt to changes in the financial system to more accurately reflect the bank's business activities in a timely manner the actual level of risk and the need to configure the level of capital, thus contributing to the development of stable and healthy financial system.   currently active in many leading international banks have clearly defined the concept of operational risk and operational risk management collected the data necessary for the loss, still have to develop the most suitable for their own internal measurement model, in order to achieve the precise management of operational risk. However, China's banking sector is concerned, the measurement of operational risk in terms of consciousness or action, are in the infancy stage of a serious shortage of quantitative management of operational risk. This new Capital Accord by directly drawing on the best practices of operational risk measurement, and advanced understanding of international banking risk management ideas and technology.   Thus, the effectiveness of operational risk management nature of the problem is that the risk of financial institutions, professional organizations as a business, not only in the prevention of possible future losses (including reducing the likelihood and severity), the more important is the risk, the use of risk opportunity to create value for financial institutions and the formation of core competitiveness is valid. Second, commercial banks, the main reason for failure of operational risk management   (a) lack of knowledge on the operation of the wind, lack of internal control culture,   a long time, China's commercial banks credit risk and market risk management more seriously, but for the definition and role of operational risk but there is misunderstanding. Operational risk and operational risk to be confused, reducing the operational risk coverage. By operating errors, human factors such as ultra vires of the operational risks posed by operational risk only in the frequency of the largest,tory burch, occupies the highest risk type, is an important component of operational risk; will be equivalent to a simple operational risk of financial crime, did not Those imperfections in the banking system or their own vulnerabilities and external events caused by such factors into account operational risk; comprehensive operational risk management and understand the importance, not form a complete, robust internal control culture, sparse not between pro-isolation analysis and processing each occurrence of operational risk, that is local, to promote accident, only concerned about appearances, there is no in-depth analysis of different root causes of operational risk. Cases show that a large number of credit losses, credit losses are part of the credit process Key personnel favor loans, illegal operations, internal control systems and other problems caused by lax, operational risk and lead to a large extent on the credit risk; focus only on Results operational risk events that have taken place to investigate and punish, ignore the things in advance prevention and control measures implemented.   (b) Operational risk management mechanisms are inadequate   internal governance structure of commercial banks in China are all large, non-centralized management. Multi-level management to increase the length of the operation chain, management, long radius, the management effectiveness of attenuation, the possibility of occurrence of operational risk and predisposing factors also increase; operational risk information can not be timely, effective delivery, for operational risk events treatment can not be implemented as soon as possible; China's commercial banks are currently within the fraud exception to the general lack of business activity monitoring indicators and related systems. The first head of the grass-roots organizations to effectively constrained systems, and primary branches and branch president too much power for personal or small group can easily rent seeking interests of the different operational risk arising from operational risk management responsibilities by the various business departments are responsible, there are overlapping functions, conflict management objectives, sound management processes disorders, lack of unified management of operational risk is too dependent on the specific internal audit department is only parallel with other business organizations, not directly under the Bank Supervisory Board, to greatly reduced the authority of the internal audit department.   (c) operational risk measurement techniques behind   lack of short-term commercial bank in China to implement the necessary support of advanced risk measurement. In the operational risk identification, assessment on the qualitative estimates and professional judgment-based, quantitative analysis can not do; no mature stage of operational risk measurement models by product accounting of commercial banks has just started, not enough to support the standard method. Does not exist in the short term to implement a prerequisite for advanced metrology and data accumulation; qualitative analysis of the operational risk processes and goals are not clear, operational risk events can not give a comprehensive qualitative assessment; MIS: information systems can not meet the complex operational risk measurement requirements, MIS information system development level in comparison with foreign commercial banks have very different, a lot of branches of commercial banks in the MIS information system building their own way.   operational risk has become a major global banking one of the areas of risk management. On a global scale, because the operational risk of financial institutions led to massive losses occurred frequently, thus the concern for increasing operational risk. Basel Committee on Banking Supervision in Basel operational risk capital will be in the regulatory framework and require banks to configure the operational risk capital. External regulatory pressures and internal motivation to promote the same time improving operational risk management, global banking industry, began to establish operational risk management framework. Most banks in China is still in the commercial banks to the real process of transformation, internal control mechanisms and operational management is not yet mature, and face greater than the international peer-operational risk, operational risk losses in fact occurred is also very attractive The. The fundamental flaw is not to establish a sound operational risk management framework. Committed to building our operational risk management to the integration framework and the introduction of China's commercial banks to provide operational risk management framework strategy recommendations. In the promotion of the Basel Committee on Banking Supervision on the evolution of operational risk management efforts and the evolution of operational risk management processes and trends, best practices of international banking. The establishment of operational risk management framework, but one of the most important trends. Operational risk management framework for building theory and practice. The framework consists of the environment, organization, strategies, tools and techniques, processes and other key elements of five interrelated components, each of these elements to be discussed in detail.   three commercial banks to improve the effectiveness of operational risk management suggestions   (a) develop a scientific and rational risk management strategies   specialized banks, the risk preferences can be summarized as Risk appetite and decided to risk management strategies, operational risk management strategy should not only be placed under the Bank's development strategy and also consider the preference shareholders. Commercial bank operational risk management strategy is to adhere to a comprehensive risk management, including: the global risk management system, comprehensive risk management scope, full of risk management culture, the whole risk management process, the new risk management approach and full The six aspects of risk measurement models. In this strategy, a comprehensive core, full, and the whole is to protect, the world is the performance of the new and full means.   (b) the establishment of an independent and efficient risk management organization system   system is operational risk management organization operating on commercial bank risk management organizational structure is the implementation of operational risk management of commercial banks to the carrier. In China's financial situation has been fully opened, commercial banks should establish independent functional departments responsible for operational risk management, and formulate relevant policies, procedures and steps to manage key products exist in the banking, business, processes and systems operational risk to effectively assist senior management to perform on the operational risk management responsibilities. Existing organizational structure of commercial banks, we should establish an independent operational risk management and efficient organization system. Risk Management Committee's responsibilities to be extended to operational risk management, operational risk management under the special group, and then press the line branches were established in the vertical operational risk management functions (ie Risk Management), and risk management positions in series, while the independent audit ( audit ) sector extended to operational risk management responsibilities of the audit. Implementation of operational risk management organization system of vertical management model to the next level on the upper level unit in case of an emergency unit is responsible for the report can leapfrog, or even to report directly to senior management to ensure the unimpeded flow of information. To the current situation, in terms of system construction risk should be two-pronged approach: First, integration, combing the existing internal management systems, to improve and strengthen its risk management function; Second, insist on institutional innovation, introduction and absorption of foreign risk management, advanced management experience and management mechanism, a reasonable digestion, combined with the actual banks, to form our unique approach to risk management in order to establish a more comprehensive framework for bank risk management systems.   One is to establish risk identification and evaluation system. Draw on advanced international experience and use modern technology, and gradually cover all business risks to establish the monitoring, evaluation and early warning systems, the implementation of credit risk and concentration risk associated with corporate credit monitoring and prompt measures to improve the concentration of risk for early warning, careful implementation of the significant non-compliance reports and risk warning system for the registration. At the same time, strengthen the collection of risk data through qualitative analysis and quantitative risk estimates, the correct evaluation of the status and degree of risk, risk control and supervision for the provision of basic basis.   second is to strengthen the mutual restraint management and decision-making mechanism. Strengthen the mandate of decentralized management, standardized decision-making procedures, science and rational allocation of Zequan Li, at all levels, to implement the balance of powers between the various departments to reduce the decision-making errors. Independent of any individual or department to prevent the completion of a business without supervision and control from happening. In addition, the implementation of management decision-making information, management of risk management to full management of the post, from qualitative to quantitative management of change management.   Third, improve the internal oversight mechanisms. Promote internal control and build a scientific and effective, proactive monitoring and prevention system, the strengthening of internal control as the key to preventing the risks of banks. Implementation of internal risk rating system, operation and management of commercial banks to conduct a comprehensive analysis of the situation and judge, and as a bank's internal and inter-bank comparison in the horizontal and vertical basis. Improving the independent and effective internal audit system, and gradually increase the level of internal audit work and efficiency.   four internal control is to regulate banks. The level of the internal control system, a simple change in the internal control as the general requirements of the employee's status, its rise to laws, regulations and systems. Object in the internal control, change control constraints on the employees more, fewer constraints on the phenomenon of management control, not only to strengthen the  Accounting , cashier, credit control work of operational links, but also to strengthen the business decision-making, sector management and control aspects of mutual restraint to ensure that internal control to cover the activities of internal management and operation of all levels and aspects.   (c) the establishment of the goal to improve the system of executive power systems   to some extent, operational risk the most effective and least expensive way is to develop detailed business rules as much as possible systems and operational processes, internal control system to synchronize with the business development, so that the system of tubes to live in, bound people, using the system to avoid operational risk. Of course, system development and implement the plan to improve the execution of the two indispensable. Therefore, strengthen the system construction, necessary to strengthen the internal risk management, improve the system of executive power, truly rule-based, violations will be corrected. To establish and standardize operational processes, to draw into the system, a clear flow chart, so that everyone can understand the procedures at a glance, the work experience in the formation of advanced fixed and can be easily found through the flow chart of internal risk control inadequacies and the potential risks and thus contribute to internal risk control and management of continuous improvement.

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