Research On Quantitative Management Of Operational Risk In Chinese Finance Companies

As a financial organization combined with industry capital and finance capital, finance company is faced with complicated environment full of risks. Especially in recent years, with the expansion of scale, the occurrence of some incidents with operational risks has caused huge loss to the enterprise groups and finance company. This reflects that the importance of operation risk management in the daily management is not be realized by the financial companies in our country. And the management methods and the construction of management system still lag behind. With the characters of concealment, diversity, operation risk is difficult to be anticipated, to be forecasted and to be quantified, so management are relatively lager than other risk. It is a very important task to effectively identify, assess, prevent and control the operation risk for finance companies.The implement of New Basel Capital Accord in2004led the operation risk management into a new phrase. The Accord summarized the three operational risk capital quantification methods, which provide the financial companies strong reference on the operation risk management. How to design a financial company operation risk management quantification model has become important premise in order to establish a good risk management system. Based on this consideration, this paper analyzes several mainstream operational risk quantification model, which is divided into two types of top-down and bottom-up respectively. This paper also introduces, discusses and compares several classical models to find a suitable model to operate risk management for financial companies in China.Based on the theoretical analysis and according to actual situation of the financial company in China, this paper conducts an empirical study on a financial company in our country by using scorecard model based on Risk and Control Self-Assessment (RCSA). Through the identification of operational risks and the risk assessment standards, as well as the opinion of experts, this model tests on the operational risk management of a financial company affiliated to an enterprise group in China. According to the test, this paper discovers that the scorecard model based on RCSA could effectively identify and measure the operational risks management level, and it could also find the business line in which the operational risks happen most. Thus we can take effective measures to control risks and improve the operational risk management level of a financial company. In order to improve the operation risk management system, this paper also deeply discusses on the internal database for operating risk management, monitoring index system, capital accrual method and reporting system based on the scorecard model.To make a conclusion, this paper reflects the strong applicability of the scorecard model based on RCSA. It could be further improved to be a widely used way in the quantification management of operational risks.