Question

In: Finance

How can a bank prepare for the expected (normal) and unexpected operation risk?

How can a bank prepare for the expected (normal) and unexpected operation risk?

Solutions

Expert Solution

Operational risk

  • Operational risk is the risk of loss due to errors, interruptions, or damages caused by people, systems, or processes.
  • Operational risk occurs in all day-to-day bank activities.
  • Operational risk examples include incorrect data entry, incorrect cheaque clearing etc.

Remedies for operational risk in bank

  1. Train the employess and workers.
  2. Establish cheque truncation system.
  3. Create operational risk management to control risk. It means Operational Risk Management is a methodology for organizations looking to put into place real oversight and strategy when it comes to managing risks.
  4. Operational Risk Management is an essential step for every company that is looking to avoid potentially damaging issues.
  5. Creating awarness amoung employess about new types banking system and application.
  6. Recruitment of best and qualified employess.
  7. Cross checking each and every activity of particular day before banking hours itself.
  8. Comparison of actual performance with the standards is undertaken to ascertain deviation, if any.
  9. As soon as deviations are reported, it is the duty of the bank manager to take steps to correct the past action so that deviations may not occur again and the plans are executed properly.


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