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/lp/emerald-publishing/industrial-strengths-operational-risk-and-banks-SFSrFyHeZs
- 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 Sheet – Emerald Publishing
Published: Sep 1, 2002
Keywords: Risk; Banking; Activity‐based costing; Benchmarking