Operational Risk Management in Financial Institutions: An Overview

Abstract

After the 2008 financial crisis, many attributed the crisis due to the inability of financial risks to manage operational risks. The period during and after 2008 was critical in providing insight on how vital operational risk management is essential to financial institutions and how best these risks can be managed. The study begins with an overview of the concept of risk and BASEL I, II and III and how they apply to financial institutions. Further, the paper discusses the growing need for operational risk management in the context of financial institutions taking into considerations various models and approaches used in the management of financial risks. Moreover, several pieces of literature discussed operational risks in the financial institutions. The paper also looks at the various methods of operational risk identification and management before concluding that for better management of operational risks in banks, there is the need to comply with both the national and international regulations and procedures.