The Research On The Operational Risk Management And The Internal Control System Construction Of The City Commercial Bank

In recent years, Although Chinese economy maintained a relatively high growth speed, it has been in down cycle. At the same time, the rapid innovation in the financial sector, especially the interpenetration between finance and Internet, had changed many of the traditional business logic, and accumulated quickly risk which many traditional businesses can’t produce. Economic downturn and financial innovation make the operational risk more susceptible to happen and larger. Compared with large-scale joint-stock commercial banks, city commercial banks which relatively lack of risk management and internal control in the fierce market competition, need to constantly innovate to maintain competitiveness to capture the market. Thus, operational risk management of the city commercial banks is particularly important. In this paper, through operational risk cases in-depth analysis of the domestic city commercial banks, we gain insight into the causes of operational risk, and propose the prevention measures against operational risk. The main conclusions of this study are as follows:First, operational risk characteristics of the city commercial banks are as follows:(1) the diversified type of operational risk include the risk of damaging customer, product and business, execution, delivery and process management risk, external risk of fraud, internal fraud risk, physical assets;(2) the type of business risk profile centralized in the commercial banks, retail banks and payment and settlement.(3) the operational risk events occur more in the retail banking products, customers, and marketing and the maximum amount of loss exist in the products, customers and marketing events, internal and external fraud, commercial banking execution. Compared with foreign banks, the delivery and process events attribute to the higher proportion of operational risk.(4) the individual loss amounts vary widely and the amount of loss of internal fraud is much higher than external fraud.Second, the reason of the city commercial banks operational risk included the lack of attention and awareness of operational risk, imperfect domestic operational risk management system and internal processing imperfections. The reasons of city commercial banks internal control system include the lack of the importance knowledge and internal control mechanisms and poor internal control management personnel quality.The third is the main reason for S Bank operational risk management problems:(1) the operational risk management system is not perfect which include mixed performance of risk management framework lines causing missing affiliate risk management function and namely rules and regulations;(2) the implementation of the risk management culture isn’t in place which represented by inadequate operational risk awareness, inadequate risk awareness training and deviated appraisal system;(3) the imperfect business system can’t meet the reasonable effective and comprehensive risk control.Fourth, we propose the measures improving internal control system and operational risk management of S banks. These include:(1) establishing clear risk management framework. It is necessary to establish an independent risk management system, improve the basic operational risk functions and revised the operational risk management system;(2) implementing unified risk management culture. To strengthen cultural guide and enhance cultural identity lead employees to proactive operational risk and create a culture of compliance and establish the concept of value;(3) establishing the advanced supportive operational risk management system;(4) strengthening internal accounting management system;(5) forming the internal and external regulatory force.