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Industrial strengths: operational risk and banks

Industrial strengths: operational risk and banks Banks are often smug about their management of risk. Smugness may well be justified for market and credit risks, but banks can learn much from industry about managing operational risk. In order to manage operational risk, industry has evolved enterprise risk/reward management systems which coordinate an internal market for risk with variations to capital charges. Industry has at least three lessons to teach banks: use activity‐based costing variances to quantify operational risk; link operational risk to external prices via an enterprise risk/reward management system; and establish measures to govern an enterprise risk/reward unit. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Balance Sheet Emerald Publishing

Industrial strengths: operational risk and banks

Balance Sheet , Volume 10 (3): 10 – Sep 1, 2002

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Publisher
Emerald Publishing
Copyright
Copyright © 2002 MCB UP Ltd. All rights reserved.
ISSN
0965-7967
DOI
10.1108/09657960210440809
Publisher site
See Article on Publisher Site

Abstract

Banks are often smug about their management of risk. Smugness may well be justified for market and credit risks, but banks can learn much from industry about managing operational risk. In order to manage operational risk, industry has evolved enterprise risk/reward management systems which coordinate an internal market for risk with variations to capital charges. Industry has at least three lessons to teach banks: use activity‐based costing variances to quantify operational risk; link operational risk to external prices via an enterprise risk/reward management system; and establish measures to govern an enterprise risk/reward unit.

Journal

Balance SheetEmerald Publishing

Published: Sep 1, 2002

Keywords: Risk; Banking; Activity‐based costing; Benchmarking

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