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The analysis of drivers of operational risks in Nigerian commercial banks

Author

Listed:
  • Olajide Solomon Fadun

    (Department of Actuarial Science and Insurance, University of Lagos, Lagos, Nigeria)

  • Diekolola Oye

    (Department of Actuarial Science and Insurance, University of Lagos, Lagos, Nigeria)

Abstract

Despite the institutionalization of operational risk management in banks and the strict supervision of bank regulators, operational risk events are still on the increase. It is becoming evident to banks that there is a need to identify the drivers of this risk and nib it at the root to reduce the probability of recurrence. Hence, this study examined the drivers of operational risks in Nigerian commercial banks and the extent to which each driver contributes to operational risk. To achieve the study’s objectives, primary data were collected from the Operational Risk Management Desks of six (6) sampled commercial banks and analyzed using SPSS and Microsoft Excel. The result showed that Internal processes, IT systems and Quality of Risk Officers are determinants of operational losses in banks. The internal process was however indicated as having the most impact. The study concluded that Internal Process is the major driver of operational risk in Nigerian Commercial banks. The researcher, therefore, recommends that bank management must have defined procedures for core activities and prioritize regular review of their critical processes to reduce operational risk events and the associated costs.

Suggested Citation

  • Olajide Solomon Fadun & Diekolola Oye, 2021. "The analysis of drivers of operational risks in Nigerian commercial banks," Bussecon Review of Social Sciences (2687-2285), Bussecon International Academy, vol. 3(3), pages 01-14, July.
    • Handle: RePEc:adi:bsrsss:v:3:y:2021:i:3:p:01-14
    DOI: 10.36096/brss.v3i3.293
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