Tisztességtelen banki gyakorlatok, avagy a működési kockázatkezelés elméleti és gyakorlati jelentősége napjainkban.

Introduction. Acknowledgements. CHAPTER 1 Functions and Forms of Banking. 1.1 Banks and Banking. 1.1.1 Core Bank Services. 1.1.2 Banks in the Economy. 1.1.3 Money Creation. 1.1.4 Payment Services. 1.1.5 Other Banking Services. 1.2 Different BankTypes. 1.2.1 Retail Banks. 1.2.2 Wholesale Banks. 1.2.3 Central Banks. 1.3 Banking Risks. 1.3.1 Credit Risk. 1.3.2 Market Risk. 1.3.3 Operational Risk. 1.3.4 Other Risk Types. 1.4 Forces Shaping the Banking Industry. CHAPTER 2 Managing Banks. 2.1 Bank CorporateGovernance. 2.2 Balance Sheet and Income Statement. 2.2.1 Bank Assets. 2.2.2 Bank Liabilities. 2.2.3 Equity. 2.2.4 Income Statement. 2.2.5 The Role of Bank's Equity. 2.3 Asset and LiabilityManagement. 2.3.1 Interest Rate Risk. 2.3.2 Liquidity Risk. 2.4 Loan Losses. 2.4.1 Valuing Assets in the Trading Book. 2.4.2 Value of Assets in the Banking Book, Performing Loans. 2.4.3 Value of Assets in the Banking Book, Non-Performing Loans. 2.4.4 Provision For Loan Losses and Loan Loss Reserves. 2.4.5 Loan Loss Reserves and Loan Losses. CHAPTER 3 Banking Regulation. 3.1 FromLiquidity Crisis to Bank Panics. 3.1.1 Liquidity Crisis and Bank Run. 3.1.2 Bank Panics. 3.2 Foundations of Bank Regulation. 3.2.1 Regulatory Objectives. 3.2.2 The Regulatory Process. 3.2.3 Stabilization: The Lender of Last Resort. 3.3 International Regulation of Bank Risks. 3.3.1 Bank for International Settlements. 3.3.2 The Basel Committee. 3.3.3 The Basel I Accord. 3.3.4 The Market Risk Amendment. 3.3.5 Weaknesses of Bank Capital Requirements in Basel I Accord. 3.3.6 The Basel II Accord. 3.3.7 Adopting Basel II. 3.4 Deposit Insurance. 3.4.1 Deposit Insurance Coverage. 3.4.2 Deposit Insurance Around the World. 3.5 The Road Ahead. CHAPTER 4 Credit Risk. 4.1 Introduction to Credit Risk. 4.2 Lenders. 4.2.1 Investment Banks. 4.2.2 Credit Rating Agencies. 4.3 Borrowers. 4.3.1 Retail Borrowers. 4.3.2 Corporate Borrowers. 4.3.3 Sovereign Borrowers. 4.3.4 Public Borrowers. 4.4 Characteristics of Credit Products. 4.4.1 Maturity. 4.4.2 Commitment Specification. 4.4.3 Loan Purpose. 4.4.4 Repayment Source. 4.4.5 Collateral Requirements. 4.4.6 Covenant Requirements. 4.4.7 Loan Repayment. 4.5 Types of Credit Products. 4.5.1 Agricultural Loans. 4.5.2 Asset-Based or Secured Lending. 4.5.3 Automobile Loans. 4.5.4 Commercial Paper. 4.5.5 Factoring. 4.5.6 Home Equity Credit Lines and Home Equity Loans. 4.5.7 Leasing. 4.5.8 Mortgages. 4.5.9 Overdraft Facilities. 4.5.10 Project, or Infrastructure, Finance. 4.5.11 Revolving Lines of Credit. 4.5.12 Syndicated Loans. CHAPTER 5 The Credit Process and Credit Risk Management. 5.1 The Credit Process. 5.1.1 Identifying the Credit Opportunity. 5.1.2 Credit Evaluation. 5.1.3 Credit Decision Making. 5.1.4 Credit Disbursement. 5.1.5 Credit Monitoring. 5.2 e Credit Analysis Process. 5.2.1 The Five Cs of Credit. 5.2.2 The Credit Analysis Path. 5.2.3 Business or Macro Risks. 5.2.4 Financial, or Micro, Risks. 5.2.5 Structural Risk. 5.2.6 Information Sources. 5.3 PortfolioManagement. 5.3.1 Concentration Risk. 5.3.2 Securitizations. 5.4 Credit Risk and Basel II Accord. 5.4.1 The Standardized Approach. 5.4.2 Internal Ratings-Based Approaches. 5.4.3 Common Features to IRB Approaches. 5.4.4 Minimum Requirements for IRB Approaches. CHAPTER 6 Market Risk. 6.1 Introduction to Market Risk. 6.2 Basics of Financial Instruments. 6.2.1 Currencies. 6.2.2 Fixed Income Instruments. 6.2.3 Interbank Loans. 6.2.4 Equities. 6.2.5 Commodities. 6.2.6 Derivatives. 6.3 Trading. 6.3.1 Fundamental Trading Positions. 6.3.2 Bid-Ask Spreads. 6.3.3 Exchange and Over-the-Counter Markets. 6.4 Market Risk Measurement and Management. 6.4.1 Types of Market Risk. 6.4.2 Value-at-Risk. 6.4.3 Stress Testing and Scenario Analysis. 6.4.4 Market Risk Reporting. 6.4.5 Hedging. 6.5 Market Risk Regulation- The 1996 Market Risk Amendment. CHAPTER 7 Operational Risk. 7.1 What isOperational Risk? 7.2 Operational Risk Events. 7.2.1 Internal Process Risk. 7.2.2 People Risk. 7.2.3 Systems Risk. 7.2.4 External Risk. 7.2.5 Legal Risk. 7.3 Operational Loss Events. 7.3.1 High-Frequency/Low-Impact Risks (HFLI). 7.3.2 Low-Frequency/High-Impact Risks (LFHI). 7.4 Operational RiskManagement. 7.4.1 Functional Structure of Operational Risk Management Activities. 7.4.2 Operational Risk Identification, Assessment, and Measurement. 7.4.3 Example of Operational Risk Measurement and Management. 7.5 Basel II andOperational Risk. 7.5.1 The Basic Indicator Approach. 7.5.2 The Standardized Approach. 7.5.3 The Advanced Measurement Approach. 7.5.4 Criteria for Using Different Approaches. 7.5.5 Basel II and Operational Risk Management. CHAPTER 8 Regulatory Capital and Supervision Under Basel II. 8.1 Bank Regulatory Capital. 8.1.1 Bank Regulatory Capital. 8.1.2 Tier 1 Capital. 8.1.3 Tier 2 Capital. 8.1.4 Tier 3 Capital. 8.1.5 Deductions and Adjustments from Regulatory Capital. 8.1.6 New Capital. 8.2 Basel II Minimum Capital Requirement. 8.3 Pillar 2-Supervisory Review. 8.3.1 Four Key Principles of Supervisory Review. 8.3.2 Specific Issues to Address During Supervisory Review. 8.3.3 Interest Rate Risk in the Banking Book. 8.4 Pillar 3-MarketDiscipline. 8.4.1 Accounting Disclosures. 8.4.2 General Disclosure Requirements. 8.4.3 Disclosing Risk Exposure and Risk Assessment. 8.5 Beyond Regulatory Capital. 8.5.1 Calculating Economic Capital. 8.5.2 Risk-Adjusted Performance Measures. 8.6 Banks,Bank Risks, and Regulation. Glossary. Index.

Commercial banks in Kenya have been facing financial performance challenges. This is reflected in the fluctuating financial performance demonstrated by various performance indicators. For instance, Kenya’s banking sector’s profit before tax dropped by an 8.8% margin to Ksh. 219.2 billion in the FY ending December 31, 2023, from Ksh. 240.4 billion reported in the preceding year (CBK, 2023). Out of the 38 commercial banks and one mortgage firm, only 11 institutions posted a strong performance rating under the CAMEL rating system employed by the CBK. This study was conducted to determine the effect of operational risk management practice on financial performance. The theory of enterprise risk management and the economic value-added model anchored the study. A cross-sectional survey research design was adopted. The study employed a deductive approach and quantitative research methods. All 38 licensed commercial banks in Kenya constituted the unit of analysis. The accessible population included heads of finance, credit, compliance, operations, and marketing. A census design was adopted to obtain the respondents who constituted the unit of observation. A structured questionnaire and a data collection sheet were used to collect primary and secondary data, respectively. The Statistical Package for Social Sciences was utilized to assist in analyzing the data using descriptive and inferential statistics. Operational risk management practice exhibited a positive correlation with financial performance. The effect of operational risk management on financial performance was statistically significant at p-value = 0.05 (t = 31.2; p = 0.000 < 0.05). The study concluded that operational risk management practice was crucial to the financial performance of Kenya’s commercial banks. It was recommended that banks develop policies that effectively guide operational risk identification, assessment, and management.

Foreword. Preface. Introduction. Notes on Contributors. List of Acronyms. PART I INTRODUCTION TO OPERATIONAL RISK MANAGEMENT. 1 Risk management: a general view (Ron S. Kenett, Richard Pike and Yossi Raanan). 1.1 Introduction. 1.2 Definitions of risk. 1.3 Impact of risk. 1.4 Types of risk. 1.5 Enterprise risk management. 1.6 State of the art in enterprise risk management. 1.7 Summary. References. 2 Operational risk management: an overview (Yossi Raanan, Ron S. Kenett and Richard Pike). 2.1 Introduction. 2.2 Definitions of operational risk management. 2.3 Operational risk management techniques. 2.4 Operational risk statistical models. 2.5 Operational risk measurement techniques. 2.6 Summary. References. PART II DATA FOR OPERATIONAL RISK MANAGEMENT AND ITS HANDLING. 3 Ontology-based modelling and reasoning in operational risks (Christian Leibold, Hans-Ulrich Krieger and Marcus Spies). 3.1 Introduction. 3.2 Generic and axiomatic ontologies. 3.3 Domain-independent ontologies. 3.4 Standard reference ontologies. 3.5 Operational risk management. 3.6 Summary. References. 4 Semantic analysis of textual input (Horacio Saggion, Thierry Declerck and Kalina Bontcheva). 4.1 Introduction. 4.2 Information extraction. 4.3 The general architecture for text engineering. 4.4 Text analysis components. 4.5 Ontology support. 4.6 Ontology-based information extraction. 4.7 Evaluation. 4.8 Summary. References. 5 A case study of ETL for operational risks (Valerio Grossi and Andrea Romei). 5.1 Introduction. 5.2 ETL (Extract, Transform and Load). 5.3 Case study specification. 5.4 The ETL-based solution. 5.5 Summary. References. 6 Risk-based testing of web services (Xiaoying Bai and Ron S. Kenett). 6.1 Introduction. 6.2 Background. 6.3 Problem statement. 6.4 Risk assessment. 6.5 Risk-based adaptive group testing. 6.6 Evaluation. 6.7 Summary. References. PART III OPERATIONAL RISK ANALYTICS. 7 Scoring models for operational risks (Paolo Giudici). 7.1 Background. 7.2 Actuarial methods. 7.3 Scorecard models. 7.4 Integrated scorecard models. 7.5 Summary. References. 8 Bayesian merging and calibration for operational risks (Silvia Figini). 8.1 Introduction. 8.2 Methodological proposal. 8.3 Application. 8.4 Summary. References. 9 Measures of association applied to operational risks (Ron S. Kenett and Silvia Salini). 9.1 Introduction. 9.2 The arules R script library. 9.3 Some examples. 9.4 Summary. References. PART IV OPERATIONAL RISK APPLICATIONS AND INTEGRATION WITH OTHER DISCIPLINES. 10 Operational risk management beyond AMA: new ways to quantify non-recorded losses (Giorgio Aprile, Antonio Pippi and Stefano Visinoni). 10.1 Introduction. 10.2 Non-recorded losses in a banking context. 10.3 Methodology. 10.4 Performing the analysis: a case study. 10.5 Summary. References. 11 Combining operational risks in financial risk assessment scores (Michael Munsch, Silvia Rohe and Monika Jungemann-Dorner). 11.1 Interrelations between financial risk management and operational risk management. 11.2 Financial rating systems and scoring systems. 11.3 Data management for rating and scoring. 11.4 Use case: business retail ratings for assessment of probabilities of default. 11.5 Use case: quantitative financial ratings and prediction of fraud. 11.6 Use case: money laundering and identification of the beneficial owner. 11.7 Summary. References. 12 Intelligent regulatory compliance (Marcus Spies, Rolf Gubser and Markus Schacher). 12.1 Introduction to standards and specifications for business governance. 12.2 Specifications for implementing a framework for business governance. 12.3 Operational risk from a BMM/SBVR perspective. 12.4 Intelligent regulatory compliance based on BMM and SBVR. 12.5 Generalization: capturing essential concepts of operational risk in UML and BMM. 12.6 Summary. References. 13 Democratisation of enterprise risk management (Paolo Lombardi, Salvatore Piscuoglio, Ron S. Kenett, Yossi Raanan and Markus Lankinen). 13.1 Democratisation of advanced risk management services. 13.2 Semantic-based technologies and enterprise-wide risk management. 13.3 An enterprise-wide risk management vision. 13.4 Integrated risk self-assessment: a service to attract customers. 13.5 A real-life example in the telecommunications industry. 13.6 Summary. References. 14 Operational risks, quality, accidents and incidents (Ron S. Kenett and Yossi Raanan). 14.1 The convergence of risk and quality management. 14.2 Risks and the Taleb quadrants. 14.3 The quality ladder. 14.4 Risks, accidents and incidents. 14.5 Operational risks in the oil and gas industry. 14.6 Operational risks: data management, modelling and decision making. 14.7 Summary. References. Index.

This paper examines the relationship between female CEOs’ risk management and earnings performance, considering that risk involves a corresponding proportionate return. We find that female CEOs have a positive relationship with the quality of internal control but a negative relationship with profitability during the 2007-2009 financial crisis, which means that the tradeoff between risk and return occurs in a crisis. Nevertheless, female CEOs show no significant relationship with company value. This finding suggests that the tradeoff between risk and return causes offset effects on the firm value during a crisis. We further investigate whether risk-related motivations influence female CEOs’ risk management performance. We set CEOs’ company-related wealth as a risk-taking motivation, and CEO age and high share ownership as risk-averse motivations. In conclusion, risk-related motivations do not advance risk management performance. This finding calls into question the argument of some literature that women's risk management ability stems from their risk-averse tendency. Notably, the risk-taking motivation positively relates to return of asset and company value, but has a negative effect on company value during a crisis. Moreover, it undermines female CEOs’ risk management during a crisis and dilutes the risk-return tradeoff.

In the current operational risk management framework, operational risk metrics are primarily used to accurately measure regulatory capital, and changes in these metrics are directly used to monitor the effectiveness of management measures. Operational risk measurement and management are, hence, two separate systems with limited connection. The measurement model does not provide direct information for determining the management tools, which inevitably leads to a lack of operational risk management targets and efficiency indicators. Empirical studies have shown that operational risk has heavy tails, and this paper hence assumes that the severity of operational losses follows the extreme value Pareto distribution. Based on the reduced-form formula of regulatory capital for operational risk, we study the sensitivity of regulatory capital concerning the shape and frequency parameters of the loss distribution. The purpose is to establish a discriminant model of these characteristic parameters connecting the operational risk measurement and management models.

Modern organizations have raised a need to actively and quickly react to the changes in external business environment, as well as in internal processes considering not only the present situation, but also evaluating possible changes and forecasting the future. Enterprise risk assessment and management, which is strongly related with foreseeing the uncertain future, becomes topical not only scientifically, but also practically seeking to reveal new and unique solutions. Operational risk management in small and medium enterprises, creating the largest part of value added in the whole European Union, demands a separate attention and coordinated decisions and means. The objective of the paper – to analyse the process of enterprise risk management in small and medium-sized enterprises, as well as to propose adequate risk management solutions for these companies. After performing a research, it was found out that small and medium enterprises more than big organizations require a risk management strategy and methodology, need to distinguish activity objectives and events influencing them, and they can efficiently apply a risk portfolio method to manage risk. In small and medium enterprises it is recommended to incorporate a risk management system based on COSO ERM model that can be modified depending on company needs and possibilities, turning it into less formal and structured and easily applicable.

Pharmaceutical risk management in Turkey: The first national overview

This chapter investigates the operational risk management and practices of Islamic and conventional banks in Saudi Arabia. Authors employ a sample of four Islamic and eight conventional banks and data gathered through a novel questionnaire administered to senior officers and managers carrying out risk management activity across five aspects of operational risk management: (i) understanding risk, (ii) risk management, (iii) risk assessment analysis, (iv) risk identification, and (v) risk monitoring. The results demonstrate that all of these play an important role in determining the quality of operational risk management. However, risk assessment analysis and risk monitoring are the most influential in determining the overall quality of operational risk management in both conventional and Islamic banks. Overall, conventional banks in Saudi Arabia are better than Islamic banks at operational risk management practices, suggesting the need for careful planning and strategizing, sound recruiting and training policies, and prudent monitoring of capital adequacy by regulators.

The Market Value of the Corporate Risk Management Function Introduction While the use of risk management strategies have increased dramatically over the last 30 years, measuring the value of risk management activities has been difficult. Much of this can be attributed to the fact that the impact of losses prevented or reduced through risk management practices cannot be easily measured. Schmit and Roth (1990) provide an explanation of the activities performed and tools used by practicing risk managers. The current study examines the issue of whether shareholders value the risk management function. Previous Work Valuation of the firm can be done through several theoretical models such as the Gordon Dividend Growth Model, the Capital Asset Pricing Model (CAPM), and the Arbitrage Pricing Theory model (APT). Cho (1988) explores the relationship between firm value and risk management activities using Gordon's Constant Dividend Growth Model. With the assumption that risk management activities affect the firm's cost of capital, he shows that under certain conditions, risk management activities lower the cost of capital, thus raising the present value of the firm to investors. This suggests that the investors might place some positive value on the risk management process. If the CAPM is valid, rational investors eliminate firm-specific risk through the process of holding a well diversified portfolio of assets, leaving only systematic or market risk. Other authors have examined the issue of whether risk management can be reconciled with the CAPM (see Diallo and Kim, 1989; Cho, 1988; Cross, Davidson, and Thornton, 1986; Cummins, 1976 and 1983; Doherty, 1984 and 1985; Doherty and Tinic, 1981; Hiebert, 1983; Main, 1983a and 1983b; Mayers and Smith, 1982; MacMinn, 1987; and Spreecher and Pertl, 1983), an issue on which the current article provides empirical evidence. Sprecher and Pertl (1983) provide the only other empirical work that is related to this question of the value of risk management activities. Using an event study methodology, they find that large, firm-specific losses create negative abnormal returns. Further, they argue that because the risk management techniques of loss prevention and control can reduce the negative impact of large losses, risk management activities should be positively valued by stockholders. Research Methods An event study methodology similar to that used by Cross, Davidson, and Thornton (1986 and 1989) and Diallo and Kim (1989) is used in this study. The events of interest are defined as published announcements of the formation or expansion of a risk management department in the sample firms. These announcements appeared in various weekly issues of Business Insurance. Investor reaction to these announcements should indicate the value placed on risk management activities by financial market participants. There were 117 announcements of this type identified during the period from 1980 through 1986. To be included in the final sample, the announcements had to refer to firms for which the Center For Research in Security Prices Daily Stock Return contained the necessary stock return information. The final sample consisted of 80 announcements relating to firms whose common stocks are traded on either the New York Stock Exchange or the American Exchange. Unlike other daily event studies in which events are usually identified as having been reported in a daily publication such as the Wall Street Journal, this study uses announcement dates associated with a weekly publication. Furthermore, the information appearing in the published announcements arrives at the publishers in the form of a press release two to five weeks prior to the publication date. Sometime during this pre-event period the original announcement is released and investors are exposed to this new information. This means that any shareholder wealth effect associated with this new information would be expected to occur sometime during this five-week period prior to the identified announcement date rather than on the actual publication date. …

Based on a survey of 1,000 Bangladeshi factories/suppliers1 producing clothes for global fashion brands and retailers, this research highlights reports of unfair trading practices encountered by manufacturers during Covid-19. Suppliers reported that retailers/brands cancelled orders, refused to pay for goods dispatched/in-process and demanded a reduction in price for orders already placed before March 2020. Since then, they further pressured the suppliers to reduce prices. Suppliers reported that in December 2021, despite the rising costs of inputs and the additional costs of Covid-19 mitigation measures, 70% of brands/retailers were still buying garments at similar prices to those in March 2020 from at least some of their suppliers. More than 50% of factories reported at least one of the following four unfair practices by brands/ retailers: cancellation of orders, price reduction, refusal to pay for goods dispatched/in production and delaying payment of invoices. Such unfair trading practices impacted suppliers’ employment practices resulting in worker turnover, loss of jobs and lower wages. Importantly, one in five factories reported that they had struggled to pay the Bangladeshi legal minimum wages since the factories had reopened following the March and April 2020 lockdown. We recommend countries with large consumer markets where global retailers and brands sell their clothes legislate to curb unfair purchasing practices by outlawing them and appointing an adjudicator or a fashion watchdog. This would ensure that buyers/retailers cannot dump disproportionate and inappropriate risks onto their suppliers and that retailers and brands conform to the norms of fair commercial practices.

A gestão de riscos é um dos principais fatores para a sobrevivência de qualquer empresa. Tradicionalmente, os Bancos divulgam dados acerca das exposições ao risco de crédito e de mercado, a fim de auxiliar a compreensão do seu perfil de risco. Entretanto, também estão expostos a outros tipos de riscos, tais como o risco operacional, o qual pode prejudicar, significativamente, o desempenho futuro, podendo levá-los até à falência. Logo, verifica-se a importância da divulgação dessas informações para a disciplina de mercado. Buscando proteger o sistema financeiro dos resultados negativos advindos dos riscos inerentes às suas atividades, o Comitê da Basiléia publicou o Novo Acordo de Capital, previsto para entrar em vigor no final de 2006, sendo, que nessa data, as instituições financeiras deverão obedecer a certos padrões mínimos no gerenciamento de seus riscos, entre eles o operacional. Este artigo tem por objetivo analisar a avaliação e o gerenciamento do risco operacional em uma instituição financeira nacional de grande porte, detectando instrumento de medida e análise e o estágio de desenvolvimento quanto ao gerenciamento do risco operacional. Para tanto, utilizou-se a metodologia de Estudo de Caso e as evidências foram obtidas por documentação, registros em arquivos, entrevistas e observação direta. Os resultados sugerem que o Banco pesquisado se encontra em estágio intermediário na administração dos riscos operacionais, contudo, está desenvolvendo técnicas e processos tanto para se adequar às exigências dos órgãos supervisores, quanto para a melhoria de seus resultados.

Purpose This study aims to analyze the media coverage of the impact of extreme weather events (EWE) and related risk management activities in Brazil. Design/methodology/approach Using a documentary analysis, the authors examined the media coverage of droughts and floods from 2003 to 2013 with concomitant official reports. Findings The results indicate that although media coverage conveys the direct impact of floods and droughts on society, it underemphasizes the importance of risk management activities. Moreover, the private sector rarely engages in risk management and mitigation activities, despite the documented supply chain disruptions. Research limitations/implications This study focuses solely on media coverage as provided by wide-circulation newspaper in Brazil and would benefit by being extended to all media platforms. Practical implications The results highlight the need for private sector involvement in risk management activities to facilitate the adaptation to climate change. Social implications The study reveals the deficiency of existing reports and lack of awareness regarding EWE. Originality/value The study contributes by focusing on climate awareness and how society can adapt to climate change, as well as how businesses can improve supply chain operations to facilitate smoother risk management.

Risk is an integral part of business. The volatility and unpredictability of the organization's external environment complicates risk management for the firm. The activity of a trade organization depends on the efficiency of logistic risks management, which in the majority of cases, may have negative consequences for the company. We provided the classification of logistic risks depending on the level of their occurrence. The principles of management of the company's logistics risks are considered. We assessed the relevance of international standards of risk management to the management of logistics risks in the trade area. The individual stages of risk management were examined in relation to the logistics of a trade organization. The article explored the use of risk maps and mapping of logistic risks in the process of risk management. We examined main methods of logistic risk management in the activities of a trading company.

For the continuous growth of firms, the contributions of effective risk management system are required. This research analyzes the impact on the firm's performance related to risk management structure which includes the risk management system, risk management activity and risk management competency. In this research, the structural equation model considering the variable which contains enterprise risk management system, risk management activity and risk management competency was suggested. Also risk management organization and management procedures are identified as in enterprise risk management system. The implementation activity and control activity were the factors related in risk management activity. And risk management competency can be described as the response level of managing risk in outside and inside the firms' environment. Finally this model was analysed empirically for 112 firms in Korea using SPSS 18.0 and Amos 16.0. As the results, the suggested hypothesis were adopted. So as to manage risk performance for their firms, the development of systematic Risk Management Framework is important for their risk management activity and risk management competency. Ultimately, we can conclude that the focusing to the systematic risk management approach could be effective on the firm's risk management performance.

After the 2008 financial crisis, many attributed the crisis due to the inability of financial risks to manage operational risks. The period during and after 2008 was critical in providing insight on how vital operational risk management is essential to financial institutions and how best these risks can be managed. The study begins with an overview of the concept of risk and BASEL I, II and III and how they apply to financial institutions. Further, the paper discusses the growing need for operational risk management in the context of financial institutions taking into considerations various models and approaches used in the management of financial risks. Moreover, several pieces of literature discussed operational risks in the financial institutions. The paper also looks at the various methods of operational risk identification and management before concluding that for better management of operational risks in banks, there is the need to comply with both the national and international regulations and procedures.