The Strategy of the Operational Risk Management: Connotations of it in Commercial Banks of China

Abstract

In China, operational risk is inherent in all banking products, activities, processes and systems. So, the effective management of operational risk has always been a fundamental element of a bank's risk management. In the Article 6 of the Guidelines on Operational Risk Management of Commercial Banks issued by China Banking Regulation Commission, the regulation authority of the commercial banks of China, pointed out that in China the board of directors in a commercial bank should treat operational risk as a major risk and developing strategy and general policies for bank-wide operational risk management that are aligned with the bank's strategic goals. In this paper, based on the equilibriums between risk/uncertainty and the value, on the characteristics of economic man about the commercial banks of China, the connotations about the operational risk management strategy in China's commercial banking have been probed into by utilizing qualitative analysis. In conclusion, the authors think that the strategy of the operational risk management should be consisted of objectives, operational risk tolerances and policies about the operational risk management in commercial banks of China.