Question

How can operational risk be minimized in a banking institution

Answer 1

As we know that operational risk in banking sector is associated with negative effects of the normal operations of the financial institutions. Such operational risk my arise due to inadequate internal management or due to negative external events.

So, operational risk can be minimized in a banking institution with the help of following steps;

1. By establishing proper internal control system so that all operations can be properly managed.

2. By spotting weak point & eliminating such points. So that most of the potential negative effects of operations can be minimized properly.

3. By establishing a internal audit system.

4. Trained employees will also help in minimizing such operational risk.

5. Proper IT based reporting system also helps in minimization of operational risk in banking institution.

6. Adoption of proper ethical work environment will help in minimization of operational risk.

7. Banking institutions also can make proper provisions for facing negative impacts of external events, so it will also help in minimization of operational risk etc.