Operational Risk Measurement Of Commercial Bank-A Method Based On Indirect Losses

Operatiaonal risk and its measurement are very important for commercial banks risk management and supervisory authorities. It is only near ten years that operational risk be viewed as a new kind of risk to management. Research on operational risk mearsurement is at very infantary stage. This paper analyzes existed research results, points out limits and main problems. Through deep analysis of characteristic properties of operational risk, the author gives a new research way of operational risk measurement and some specific measurement approaches which based on indirect losses.The research results of operational risk measurement can be classified into three aspects of measurment models, data collection and some experience studies. At present, the main models include basic indicator approach, standardized approach, internal measurement approach, loss distribution approach, scorecard approach, extreme value theory and Baysean network method ect. The existed models all have some vital defects. Data collection is one of biggest problems which hindered studies of operational risk measurement. Experiment studies have just begun. The main limits of present studies are as below: firstly, the research lack of systematic, the methods and results are in disorder, there are no main streames which link main results; secondly, researches all for requiement of regulary need, there seldom research focus on the need of commercial bank risk management; thirdly, researches all based on direct losses. The main problems of operational risk measurement are that if operational risk can be quantified, defination of operational risk, loss defination, modeling data and model risk etc.Operational risk exist in bank's internal operation processes, internal activities rely on executive orders which cannot be valued by market values, so operational risk has indirect loss property. Through characteristic analysis, this paper defines operational risk, analysizes operational risk's indirect property, distinguishes regulatory operational risk measurement and bank's operational risk measurement, discusses theory basis of operational risk measurement which based on modern corporation theory, learns from quality management and factory management, through standardized method to solve data problem, and finally gives some commercial bank operational risk measurement approaches such as internal control evaluation, basic indicator approach and standardized approach based internal control evaluation, operational risk ecnomic capital measurement based on action, Baysean network method and risk and control self-assessment etc.