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1 – 10 of over 4000Komal Altaf, Huma Ayub, Malik Shahzad Shabbir and Muhammad Usman
Due to increase in operational risk, banks are facing huge losses. In order to avoid losses, banks need to manage operational risk. This study aims to analyze the impact of…
Abstract
Purpose
Due to increase in operational risk, banks are facing huge losses. In order to avoid losses, banks need to manage operational risk. This study aims to analyze the impact of operational risk management (ORM) processes, which include identification, assessment, analysis, monitoring and control in the presence of corporate governance (CG) that can also contribute to effective ORM practices.
Design/methodology/approach
Operational risk management processes are used to manage operational risk along with CG. Primary data are collected through questionnaire from (167) operational risk managers of commercial banks. Multiple linear regressions has been run to analyze the data.
Findings
Results indicate significant impact of CG and operational risk identification (ORI), monitoring and control on ORM practices in commercial banks of Pakistan.
Originality/value
The study suggests policy makers to improve the ORM framework by CG. Beside this, in order to lessen operational risk, proper identification, monitoring and control of operational risk could also contribute.
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Manuel Rossetti, Juliana Bright, Andrew Freeman, Anna Lee and Anthony Parrish
This paper is motivated by the need to assess the risk profiles associated with the substantial number of items within military supply chains. The scale of supply chain management…
Abstract
Purpose
This paper is motivated by the need to assess the risk profiles associated with the substantial number of items within military supply chains. The scale of supply chain management processes creates difficulties in both the complexity of the analysis and in performing risk assessments that are based on the manual (human analyst) assessment methods. Thus, analysts require methods that can be automated and that can incorporate on-going operational data on a regular basis.
Design/methodology/approach
The approach taken to address the identification of supply chain risk within an operational setting is based on aspects of multiobjective decision analysis (MODA). The approach constructs a risk and importance index for supply chain elements based on operational data. These indices are commensurate in value, leading to interpretable measures for decision-making.
Findings
Risk and importance indices were developed for the analysis of items within an example supply chain. Using the data on items, individual MODA models were formed and demonstrated using a prototype tool.
Originality/value
To better prepare risk mitigation strategies, analysts require the ability to identify potential sources of risk, especially in times of disruption such as natural disasters.
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This paper aims to propose a technique based on cognitive assessments to quantify identified operational risks from the perspective of container shipping or logistics system…
Abstract
Purpose
This paper aims to propose a technique based on cognitive assessments to quantify identified operational risks from the perspective of container shipping or logistics system administrators. The results derived from the risk quantification could be used to prioritize risks as well as support the decision-making process in risk prevention and mitigation.
Design/methodology/approach
This paper identified container shipping operational risks (CSORs) from a logistics perspective. A multivariate risk evaluation mechanism by fuzzy rules Bayesian network (FRBN) was established. An improved two-level parameter set based on the failure mode and effects analysis (FMEA) was used to support the input extraction process. By feeding cognitive assessments into the model, the identified risks are evaluated based on their utility values. An illustration example and a sensitivity analysis were carried out to justify and validate the proposed model.
Findings
The highest positions in the prioritized list of CSORs in the case study are dominated by risks in the physical flow with the first three are piracy and terrorism, force majeure and port congestion. The results derived from the case study with the satisfaction of all pre-defined axioms proved the feasibility and illustrated the functionality of the proposed risk assessment and prioritization technique.
Originality/value
Controlling risk is irrefutably a significant issue of container shipping and logistics management because of the inconsistency of risk definitions and the involvement of uncertainties. The proposed risk evaluation mechanism and the identified list of CSORs could be beneficial in system management, decision-making and reliability performance.
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Introducing radical changes to the methodologies for the determination of capital requirements, the final stage of the Basel III standards, which is referred to as “Basel IV” by…
Abstract
Purpose
Introducing radical changes to the methodologies for the determination of capital requirements, the final stage of the Basel III standards, which is referred to as “Basel IV” by the industry, will be a significant challenge for the global banking sector. This article reviews the main components of the new framework, analyses its ongoing implementation in the European Union and discusses its potential impact on banks, putting forward policy recommendations.
Design/methodology/approach
This article uses primary sources such as the publications by the Basel Committee for Banking Supervision and the European Commission. It also reviews the secondary sources, including both academic articles and analyses by various stakeholders. However, this article does not undertake any empirical analysis.
Findings
This article discusses that Basel IV will introduce strategic, operational and regulatory challenges for banks in scope. It also identifies a number of areas which are subject to further debate in the European Union such as the enhanced due diligence requirements under the new credit risk framework; governance, reporting and control rules under the operational risk framework; exemptions for certain derivative transactions under the credit valuation adjustment framework and the level of application of the capital floors within banking groups. This article concludes that the global implementation of the reforms by all jurisdictions and transposition into national banking laws concurrently with the European Union in line with the Basel Committee's implementation timeline is important from a financial stability standpoint.
Originality/value
The article presents an up-to-date and comprehensive review of the practical implications of Basel IV standards. It analyses the implementation of the standards in the case of the European Union, reviews the potential policy implications and presents recommendations for risk management practitioners.
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An Thi Binh Duong, Tho Pham, Huy Truong Quang, Thinh Gia Hoang, Scott McDonald, Thu-Hang Hoang and Hai Thanh Pham
The present study is performed to identify the propagation mechanism of the ripple effect as well as examine the simultaneous impact of risks on supply chain (SC) performance.
Abstract
Purpose
The present study is performed to identify the propagation mechanism of the ripple effect as well as examine the simultaneous impact of risks on supply chain (SC) performance.
Design/methodology/approach
A theoretical framework with many hypotheses regarding the relationships between SC risk types and performance is established. The data are collected from a large-scale survey supported by a project of the Japanese government to promote sustainable socioeconomic development for the Association of Southeast Asian Nations (ASEAN) region, with the participation of 207 firms. Structural equation modeling (SEM) is used to test the hypotheses of the theoretical framework.
Findings
It is indicated that human-made risk causes operational risk, while natural risk causes both supply risk and operational risk. Furthermore, the impacts of human-made risk and natural risk on performance are amplified through operational risk.
Research limitations/implications
This study is one of the first attempts that identifies the propagation mechanism of the ripple effect and examines the simultaneous impact of risks on performance in construction SCs.
Originality/value
Although many studies on risk management in construction SCs have been carried out, they mainly focus on risk identification or quantification of risk impact. It is observed that research on the ripple effect of disruptions has been very scarce.
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The purpose of this study is to examine the relationship between corporate governance and risk management of Indonesian banks.
Abstract
Purpose
The purpose of this study is to examine the relationship between corporate governance and risk management of Indonesian banks.
Design/methodology/approach
Implementation of good corporate governance is measured by good corporate governance composite rating, which is the result of bank's self-assessment. Bank risk managements are measured by market risk, credit risk, liquidity risk and operational risk.
Findings
The study results showed that good corporate governance implementation in Indonesia was able to influence bank risk. There were differences in credit risk, liquidity risk and operational risk in banks with different governance ratings, but not at market risk.
Originality/value
The effectiveness of risk management and good corporate governance implementation is needed to enable banks to identify problems early, to follow up on rapid improvements and to be more resilient to crises. This study is an analysis of the relationship between corporate governance and banks' risk management in Indonesia. In particular, risk management is measured by four risks: market risk, credit risk, liquidity risk and operation risk.
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Arun Chockalingam, Shaunak Dabadghao and Rene Soetekouw
Basel III regulations require banks to protect themselves against strategic risk. This paper aims to provide a comprehensive and measurable definition of this risk and proposes a…
Abstract
Purpose
Basel III regulations require banks to protect themselves against strategic risk. This paper aims to provide a comprehensive and measurable definition of this risk and proposes a framework to estimate economic capital requirements.
Design/methodology/approach
The paper studies the literature and solicits expert opinion in formulating a comprehensive and measurable definition of strategic risk. The paper postulates that the economic capital for a bank’s strategic risk should be estimated using the cost of equity as the profitability threshold, rather than zero and develops a simulation-based framework to estimate economic capital.
Findings
The framework closely matches the actual economic capital outlay for strategic risk from our case study of ABN AMRO. It is shown that a bank’s strategic growth plans can fall into one of two scenarios based on risk-return characteristics. In one scenario, the required economic capital outlay will increase, and decrease in the other.
Practical implications
This framework is generalizable and makes use of widely accepted and used practices in banks, making it readily implementable in practice. It does not introduce errors resulting from model selection, parameterizations or complex calculations.
Social implications
Society would be worse off in the absence of banking and lending services. Banks need to take risks to grow and stay competitive. The framework facilitates better strategic risk management, protecting banks from collapse and reducing the need for taxpayer-funded bailouts.
Originality/value
The paper provides a measurable and practitioner-verified definition of strategic risk and proposes a simple framework to estimate economic capital requirements, a crucial topic, given the threats and increased levels of strategic risk facing banks.
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Francesca Bernini, Paola Ferretti and Antonella Angelini
This paper aims to focus on the relation between digital transformation and banks’ reputation, as examined through the information disclosed by the five largest Italian banking…
Abstract
Purpose
This paper aims to focus on the relation between digital transformation and banks’ reputation, as examined through the information disclosed by the five largest Italian banking groups’ efforts to extend and enhance their digital resources. Considering digitalization as a key strategy for managing reputation, which, in turn, can leverage financial and value performance management, the paper investigates whether and how digital activities might affect banks’ reputation. Therefore, this paper proposes the relationship between digitalization and reputation as a lever for performance management and for increasing efficiency.
Design/methodology/approach
The authors use content analysis to generate a digital disclosure index, categorizing activities human, structural and relational. For banks’ reputations, the proxies are a measure of corporate reputation and a reputational risk index. Methodologically the study used multiple case studies, considered as particularly suitable to gain an in-depth understanding of the topic in the case of the five banks. A collection of secondary data and semi-structured interviews are included.
Findings
Overall, the digitalization-reputation link shows that banks’ reputation is variously affected, not only by exposure to risk (including reputational risk) but also by strategic issues such as digitalization and the effectiveness of the corresponding communication. Consequently, banks should view digitalization as a key driver to be considered not in a stand-alone perspective, but in a combined approach.
Research limitations/implications
Continued research should include the Covid-19 implications. Additionally, it would be important to compare a larger number of banks, with different characteristics, also including variables indicating the corporate governance mechanisms.
Practical implications
The analysis contributes to fostering scholars’ and practitioners’ management of the digital transformation challenge that is a current key-factor, capable of increasing banks’ value. It considers not only the drivers directly affecting monetary value but also the institutions’ social and relational value, as well as their reputation.
Originality/value
This paper extends prior research on the digitalization-reputation relation by investigating digital transformation through disclosure of activities in this area within the Italian banking sector. It allows to leverage the key-factors that can contribute to increasing banks’ value, considering not only the drivers directly affecting monetary value but also the institutions’ social and relational value, as well as their reputation.
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Rogério Serrasqueiro and Jonas Oliveira
The study aims to analyse annual reports of the non-financial European firms listed at the EURO STOXX 50 index over the period of 2007 and 2011.
Abstract
Purpose
The study aims to analyse annual reports of the non-financial European firms listed at the EURO STOXX 50 index over the period of 2007 and 2011.
Design/methodology/approach
This study intends to address two main issues: to what extent the country-level institutional forces compel (directly) firm's risk reporting (RR) behaviour and in which way these country-level institutional forces moderate the relationship between RR and firm-level characteristics.
Findings
Main findings indicate that, during this period, the European listed companies disclosed more risk information on a voluntary basis (such as operational and strategic risks) and with better informative content (more forward-looking and focused on positive news). Consistent with institutional theory, findings confirm that the country-level institutional forces explain variations on RR. Additionally, it also indicates that the relationship between RR and leveraged firms is weaker among countries with stronger institutional forces. These findings have several implications for investors and regulators in Europe basically in helping achieve efficiency in investment decisions and to stimulate further efforts to improve RR regulations.
Originality/value
This study makes two major contributions. First, it extends Elshandidy's et al. (2015) work by using other country-level institutional forces that capture the efficacy of corporate boards, the protection of minority shareholders' interests, country's level of democracy, law enforcement mechanisms and press freedom. Second, it uses firms that are considered as a blue-chip representation of super-sector leaders in the Eurozone (but from different institutional contexts). This research setting can be more insightful in shedding some light towards our understanding on how these leading firms can promote innovative and high quality level of RR and how country-level driving forces influence these variables.
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