Managers in banks are mostly concerned about achieving business objectives and balancing risks against costs and revenues. Yet the question that is always asked whether the managers are able to determine exactly how much risk is mounting in their business area?
Three areas have been identified in banks that trigger the level of internal risk to dangerous levels mainly, pressure from business growth, pressure from the corporate culture, and pressure revolving around risk information/risk exposure. These pressures were recognized as Operational risk related, and the Basel Accord envisaged that firms need to be aware of changes of operational risk exposure and should therefore escalate this risk, as it offers the greatest opportunity for preventing crises. Hence the governance of Operational risk involves more than just an exercise of capital calculation.
This research analyzes the effect of the endogenous variables (internal risk) on the health and resilience of the Lebanese “Alfa” banks with a focus on uncovering risk practitioners’ experience in managing the bank’s internal resilience relative to events that could be detrimental to the financial institution, taking into consideration 4 basic dimensions: 1) Banks’ Risk culture, 2) Banks’ Operational Risk Perception, 3) Banks’ Investment in Operational Risk Management, and 4) Operational Risk Management a value added tool to banks. In addition, an analysis of the Sharpe Ratio for each bank has been conducted to determine banks with best risk management practices.
The answers concur that heading toward extra capital buffer is not the feasible solution to reduce operational risk, yet they differ in their approaches to manage operational risk whether this should be centralized or decentralized, and relayed various opinions on the effectiveness of Operational Risk Management tools. Besides, they mostly agree that the experience that the Lebanese sector had towards facing crises be it locally, regionally and internationally, had set the Lebanese banking sector in an alert mode for any possible adverse events. Nevertheless, they did not negate the fact that they are facing risks that were new to the Lebanese banking sector namely the non-compliance risk, which would endanger the Lebanese banking sector and not just the bank itself.
This research concluded that Operational risk Management can play a part in the resilience of the financial institution; it has to build an enterprise risk-adjusted performance culture around the banks’ people (risk attitude), processes, and risk information to interact at the level of risk exposure and adjust accordingly.
Seules les 10 dernières publications sont affichées