Operational Risk Management Of Commercial Banks In China

As the core of economic activities, banking industry's security and stabilization is criticalfor economy. Since 1990s, scales of banks have enlarged rapidly, and the operationcomplexity has reached a now level. As a result, banks face more and more operational risk,which leads a series of striking failures in operational risk. How to evade operational risks andmake loss minimum, become a hot topic of finance. So, in 2004, Basel Committee released"New Basel Accord", which takes operational risk into the framework of management, andputs forward the new requirement on measurement and management of international bankoperational risk.In China, the weak awareness of operational risk of practitioner in bank, behindhandmethods of risk management, as well as the lack to experience have led so many occurrencesof case caused by operational risk, which make China so much economy loss and furthermoreaffect both social image of bank and the normal social order. As a result, how to take a correctattitude to operational risk and to establish a operational risk management system based onadvanced management experience and lessons from failure to improve the operational riskmanagement, become a problem, which should be solved as soon as possible.In this dissertation, the author first expatiates on the connotation of operational risk ofcommercial banks, its classification and characteristics, analyses the necessity ofstrengthening the management of operational risk. Secondly, through the case study ofoperational risk, the author analyses the bankrupt of Barings,find outs its cause with therespect of both system and management and sums up the lessons we should learn form thiscase. Then the author addresses the status of operational risk of commercial banks in Chinaand the problems in operational risk management, points out the defect in management ofcommercial banks' operational risk management in China. At last, countermeasures are putforward from the aspects of framework, process and quantification of operational riskmanagement.