Impact Of Operational Risk Management Banking Profitability Finance Essay

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Desire the study and understanding that how the impact of Operational Risk Management is on banking profitability in Pakistan. The primary focus of the study is as explanatory so proposed study will use quantitative design in with structured questionnaires will be filled and find out Operational Risk Management about Banking Profitability. A risk management process that includes the three basic elements of assessing risks, controlling risk exposure, and managing risks will help banks and regulators attain goals.

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Due to a number of social, political, and economic problems Pakistan suffers.  According to a recent survey, in Asia about 90 percent of banks consider operational risk as important as market or operational risks. Overall all study says that ORM can be implemented if economic condition is stable.

Risk Management features is an important feature in the financial markets. Changes in markets, techniques, technologies, and products have changed the landscape of Operations and fueled the explosive development of Operational Risk management. Basically operational risk involves breakdowns in internal control and majorly corporate governance. Breakdowns lead the operations due to error, fraud or failure to perform financial activity. The financial and public companies authorities are demanding a far greater level of disclosure and awareness by directors about the risks they manage and the effectiveness of the controls they have in place to reduce or mitigate these risks. All these changes and circumstances have triggered the need for an efficient Operational Risk Management system in Organizations. Executive management and BOD of any organization now willingly expect about prompt solution of Operational Risk (OR) because it can directly hit their stake holders trust on an organization or any financial institutes. Basically ORM is a decision making tool- used by people at all levels to increase operational effectiveness by anticipating hazards and reducing the potential for loss, thereby increasing the probability of a successful mission. ORM is an effective tool for maintaining readiness in peacetime and success in conflict because it helps conserve assets so they can be applied at the decisive time and place. British Bankers’ Association (1997) and Jameson (1998)

Traditionally many enterprises face and manage such type of problem in parts but some small enterprises tackle such type of cases and situation by maintaining or creating their own analysis and assumptions.


In the every business environment Operational risk (OR) is there. It is the oldest risk facing by banks and other financial institutions. Any financial Institution will face operational risk long before it decides on its first market Trade or credit transaction. Of all the different types of risk facing financial Institutions, OR can be among the most devastating and the most difficult to anticipate. The spectacular collapse of Barings in 1995, the terrorist attack on the World Trade Center in September 2001,

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