Abstract
Operational risk has been considered as the key issue of Chinese commercial banks in recent years. Transmission mechanism of operational risk has been a vital part of risk control. In order to better control and manage the operational risk, it is helpful to further understand the whole dynamic process of the risks affecting the business. This paper proposes a transmission model based on a scale-free network that simulates the transmission process of operational risk and explains the transmission mechanism of operational risk factors. Using the Monte Carlo simulation based on the Barabasi–Albert (BA) model under different conditions, factors that affect the operational risk losses are analysed. It is found that the node degree of operational risk network as well as the selection of initial node to attack plays an important role in losses, while the scale of the network plays a small role in affecting the losses. Finally, some control recommendations based on the simulation results are presented. The result...
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