Operational Risk Management in Indian Banks: A Critique

The banking environment is continuously changing. The comfort of an insulated environment offered by regulations in the past is on the fast wane. The resulting uncertainties are calling for risk identification, measurement and management. One such all-pervasive risk that banks face is operational risk. It is one of the oldest risks in banking that has been managed all along quite informally but of late has suddenly caught everybody’s attention. This increased attention could be owing to the expansion in the range of activities being pursued in the recent past, perceived increase in operational risk itself, reaction to major loss events that have occurred internally, threat of increased competition by virtue of blurring boundaries among financial services providers and the resulting falling spreads, management commitment for enterprise-wide risk management, regulatory attention, etc., Against this bark-drop, the article attempts to trace the sources of operational risk. Their measurement and management.