Purpose: Operational risks appear as the main threats of the modern world. Mistakes made by employees, an imperfect information systems or changes in the law can cause losses that businesses today are not even able to estimate. Therefore, in the face of widespread the asymmetry of information,...

The opposition in a number of countries to the inclusion of nuclear energy in a sustainable energy portfolio, in part due to the dread of what the “nuclear” word inspires, has limited quantitative scientific foundation of the real benefits and risks. This has been amplified by the lack of a...

The purpose of this paper is to propose a methodology that enables researchers to identify relevant search terms when conducting a literature review. This methodology requires an analysis of existing literature review articles on the topic under study to form keywords. The objective of this...

Operational risk events have severely impacted the development of third-party payment (TPP) platforms, and have even led to a discussion on the operational risk capital charge settlement by relevant international regulators. However, prior studies have mostly focused on qualitative mechanism...

Purpose - Due to increase in operational risk, banks are facing huge losses. In order to avoid losses, banks need to manage operational risk. This study aims to analyze the impact of operational risk management (ORM) processes, which include identification, assessment, analysis, monitoring and...

This research looks into the impact of risk management on CIMB Bank's performance. This study's data originates from DataStream and CIMB Bank Malaysia's annual report. The study sample encompassed a 5-year study period. Bank performance, which is oxidised by ROA and ROE, and risk management,...

This paper investigates the impact of corporate social responsibility (CSR) performance by listed companies on the cost of equity capital from the perspectives of enterprise risk management and capital market risk pricing and discusses the mediating effects of operating risk. Using the causal...

Due to the rise in the demand for information communication technologies (ICT), the need for operational risk resilience within the European insurance market sector has grown exponentially. This study aims to use the case of blockchain to evaluate whether the five characteristics determined from...

Basel III regulation intent is to increase the resiliency of banks through effective risk management practices that can reduce significant idiosyncratic operational losses. A systemic risk event that leads to significant losses in a bank holding company (BHC) can expose them to become insolvent...

Operational risk is defined as the potential losses resulting from events caused by inadequate or failed processes, people, equipment, and systems or from external events. One of the most important challenges for the management of the company is to improve its results through its operational...

Presentation on fundamentals of Operational Risk Modelling. The core components of a quantitative operational risk modelling framework. Based on references:1. Cruz MG, Peters GW, Shevchenko PV. Fundamental aspects of operational risk and insurance analytics: A handbook of operational risk. John...

The DuPont decomposition of profitability into profit margin and asset turnover has been applied extensively to forecast future profits. This paper provides a complementary analysis under which the DuPont decomposition also informs about the risk that profits may differ from expectation. In the...

We present a general methodology based on skew t copulas and Bayesian inference for modelling extreme multivariate dependent losses and the regulatory capital for operational risk. Current approaches fail to model both asymmetric dependence and accurate extreme upper tail dependence (e.g. 99.9%...

We develop a normative framework for the optimal design, value assessment, and risk management integration of combined custom contingent claims. A risk averse firm faces a mix of financially insurable and noninsurable risk. The firm seeks optimal positioning in a pair of custom claims, one...

Using supervisory data on operational losses from large U.S. bank holding companies (BHCs), we show that BHCs with socially responsible workforce policies suffer lower operational losses per dollar of total assets and incidence of tail risk events. The association is more pronounced for...

This paper provides a practical approach to construct and learn a Bayesian network model that will enable an operational risk manager communicate actionable operational risk information for informed decision making by senior managers. Bayesian networks and their application in operational risk...

In their quest to assign capital appropriately, banks need the ability to compare two products in a way that objectively ascertains which is operationally riskier and by how much. Perceptions of changes in these risks can be used to predict future risk. Enter the prime metric to save the...

Cash and debt management operations are part of the 'transactional' functions of public financial management. It is critical that these functions are resilient to external disruptions, ranging from information and communication technology (ICT) system outages to natural disasters. This technical...

[NOTE: This paper was written in late 2014 and early 2015. It is relevant given the continued movement of Bitcoin toward the mainstream, exemplified by El Salvador's adoption of Bitcoin as legal tender in June 2021.]After a slow beginning in 2009, the digital currency Bitcoin has edged closer to...

This study empirically examines, in the setting of insurance companies, the hypothesis that investors facing more operating risk may behave as if they were more risk averse in investment decisions. Specifically, we study how operating risk from underwriting insurance policies affects insurers'...

Operational disruptions can impact a firm's risk, which manifests in a host of operational issues, including a higher holding cost for inventory, a higher financing cost for capacity expansion, and a higher perception of the firm's risk among its supply chain partners. While disruptions have...

This paper considers a bivariate operational risk cell model, in which the loss severities are modeled by some heavy-tailed and weakly (or strongly) dependent non-negative random variables, and the frequency processes are described by two arbitrarily dependent general counting processes. In such...

This study shows that banking organization growth is associated with higher operational losses per dollar of total assets and incidence of tail risks. Event studies using M&A activity and instrumental variable regressions provide consistent evidence. The relationship between banking organization...

This paper considers some univariate and multivariate operational risk models, in which the loss severities are modelled by some weakly tail dependent and heavy-tailed positive random variables, and the loss frequency processes are some general counting processes. In such models, we derive some...

This paper presents a methodology to calibrate the distribution of losses observed in operational risk events. The method is specifically designed to handle the situation where individual event information is only available above an approved threshold and a limited set of below threshold...

We study earnings per share (EPS) forecast revision and accuracy of banking analysts around operational risk event announcements in U.S. banks. We find that first announcements of operational risk events are more informative than their settlement announcements. Optimistic banking analysts revise...

We study how corporate social responsibility (CSR) impacts a manufacturer's decisions on mergers and acquisitions (M&As). M&As are accompanied by significant changes in organizations and operational systems, and the decision of M&A may be affected by potential challenges and operational risks in...

This study examines the efficiency of operational risk management of 85 Russian commercial banks during the period 2008—2017. This study uses data envelopment analysis (DEA) with financial ratios to assess the efficiency of operational risk management. The study adopts the basic indicator...

The cost of cybersecurity incidents is large and growing. However, conventional methods for measuring loss and choosing mitigation strategies use simplifying assumptions and are often not supported by cyber attack data. In this paper, we present a multivariate model for different, dependent...

An array of developments impacting the financial services industry, such as increasing complexity, interconnectedness, third party dependencies and digitalization, means operational resilience will remain a significant area of concern for policy makers, investors and customers. The purpose of...

While operational risk is generally perceived as idiosyncratic with limited systemic implications, we document that operational risk significantly threatens financial stability. Using supervisory data on large U.S. bank holding companies (BHCs) over 2002:Q1-2016:Q4, we find operational losses...

In this paper, we propose a general continuous-time stochastic-modeling framework where a financial firm offers incentive bonuses to a team of employees, who would thus exert effort to reduce operational risk losses. We characterize employees' Nash equilibrium efforts and the firm's optimal...