scholarly journals Impact of Ownership Structure and Firm Size on the Operational Risk Management of Islamic Banks in Pakistan

2021 ◽  
Vol 4 (1) ◽  
pp. 209-217
Author(s):  
ADNAN ◽  
Dr. MUHAMMAD IBRAHIM KHAN ◽  
Dr. MUHAMMAD IBRAHIM KHAN ◽  
SYED IMRAN KHAN
Keyword(s):  
Risk Management ◽  
Firm Size ◽  
Ownership Structure ◽  
Stock Exchange ◽  
Operational Risk ◽  
Islamic Banks ◽  
Data Set ◽  
Operational Risk Management ◽  
Minimum Capital ◽  
The Impact

This study investigates the impact of ownership structure and firm size on the operational risk management (ORM) in the context of Islamic banks in Pakistan. ORM is the excess capital acquired after subtracting actual capital from minimum capital required for handling operational risk. While, the bank size is measured as deposit plus advances or log of total assets. The Basic Indicator Approach (BIA), and Standardize Approach (STA) is used to measure the minimum capital required for managing operational risk. A panel data set of 19 Islamic banks listed on the Pakistan Stock Exchange (PSX) is analyzed over the period from 2012 to 2016.Three important observations are provided by the results; first increase in the size of the Islamic banks tend to lower the surplus capital maintain by banks for managing operational risk. Second, a significant positive relationship is reported between excess capitals required for managing operational risk and public owned Islamic banks. Third, the results are reported as robust as all three regression model provided similar results.

Relationship between operational risk management, size, and ownership of Indian banks

2016 ◽  
Vol 42 (10) ◽  
pp. 930-942 ◽  
Author(s):  
Sirus Sharifi ◽  
Arunima Haldar ◽  
S.V.D. Nageswara Rao
Keyword(s):  
Risk Management ◽  
Financial System ◽  
Operational Risk ◽  
Developed Countries ◽  
Content Type ◽  
Operational Risk Management ◽  
Minimum Capital ◽  
Indian Banks ◽  
High Level ◽  
The Impact

Purpose The purpose of this paper is to analyse the relationship between operational risk management (ORM), size, and ownership of Indian banks. This is important in the context of financial crisis experienced by developed countries due to lax regulation. Design/methodology/approach ORM practices of Indian banks are proxied by excess capital (over the required minimum capital for operational risk). Size of a bank is measured as deposits plus advances. Our sample includes 61 Indian banks during the period from 2010 to 2013. The authors empirically examine the impact of bank size on excess capital using panel data regression model. Findings The results suggest that size of Indian banks is inversely related to excess capital held by them for managing operational risk. The inverse relationship implies that smaller banks hold higher excess capital over the required minimum as per Basel norms. There is no significant relationship between ownership (public, private and foreign) and excess capital held by banks for managing operational risk. Practical implications The study has implications for Indian banks given the high level of losses due to bad loans, and the implementation of Basel III norms by the central bank, i.e. Reserve Bank of India. Social implications The study has implications for Indian financial system as a large percentage (about 33 per cent) of household savings are deployed in deposits with commercial banks and other financial institutions. The bank failure(s) can have disastrous consequences for the Indian economy as the capacity of the Indian financial system to withstand such shocks is highly doubtful. Originality/value There is very little evidence on ORM practices of Indian banks, and its relationship with size and ownership. The study assumes significance in the context of significant changes in the institutional and regulatory framework.

Impact of Ownership and Size on Operational Risk Management Practices: A Study of Banks in India

2017 ◽  
Vol 18 (3) ◽  
pp. 795-810 ◽  
Author(s):  
Deepak Tandon ◽  
Yogieta S. Mehra
Keyword(s):  
Risk Management ◽  
Factor Analysis ◽  
Data Collection ◽  
Management Practices ◽  
Operational Risk ◽  
Test Reliability ◽  
Operational Risk Management ◽  
Data Collection And Analysis ◽  
Loss Data ◽  
The Impact

The financial crisis and resulting failure of large banks worldwide has shaken the entire world. Improper management of operational risk has been touted as one of the reasons for this failure. In light of the rising importance of operational risk management (ORM) in banks, the study explores the range of ORM practices followed by a cross section of Indian banks and compares them with the banks worldwide. The study also analyses the impact of size and ownership of banks on these practices. Reliability analysis using Cronbach alpha model, Kaiser–Meyer–Olkin (KMO) measure of sampling adequacy and Bartlett’s test of sphericity was used to test reliability of questionnaire and justifies the use of factor analysis. Factor analysis was performed to extract the most important variables in ORM. The small size of bank was observed to be a deterrent to deep involvement of operational risk functionaries, collection and usage of external loss data and data collection and analysis. Further, the performance/preparedness of public sector and old private sector banks lagged behind peers in usage of key reporting components, such as risk and control self-assessment (RCSA), key risk indicators (KRI), scenarios, collection and usage of external loss data, data collection and analysis and quantification and modelling of operational risk.

Operational Risk Management of Islamic Banks

2020 ◽  
pp. 455-470
Author(s):  
Mahfod Aldoseri ◽  
Andrew C. Worthington
Keyword(s):  
Risk Assessment ◽  
Risk Management ◽  
Saudi Arabia ◽  
Operational Risk ◽  
Islamic Banks ◽  
Operational Risk Management ◽  
Risk Monitoring ◽  
Conventional Banks ◽  
Senior Officers

This chapter investigates the operational risk management and practices of Islamic and conventional banks in Saudi Arabia. Authors employ a sample of four Islamic and eight conventional banks and data gathered through a novel questionnaire administered to senior officers and managers carrying out risk management activity across five aspects of operational risk management: (i) understanding risk, (ii) risk management, (iii) risk assessment analysis, (iv) risk identification, and (v) risk monitoring. The results demonstrate that all of these play an important role in determining the quality of operational risk management. However, risk assessment analysis and risk monitoring are the most influential in determining the overall quality of operational risk management in both conventional and Islamic banks. Overall, conventional banks in Saudi Arabia are better than Islamic banks at operational risk management practices, suggesting the need for careful planning and strategizing, sound recruiting and training policies, and prudent monitoring of capital adequacy by regulators.

Operational Risk Management: A Stochastic Control Framework with Preventive and Corrective Controls

2020 ◽  
Vol 68 (6) ◽  
pp. 1804-1825
Author(s):  
Yuqian Xu ◽  
Lingjiong Zhu ◽  
Michael Pinedo
Keyword(s):  
Risk Management ◽  
Stochastic Control ◽  
Financial Services ◽  
Operational Risk ◽  
Investment Strategy ◽  
Modeling Framework ◽  
Data Set ◽  
Operational Risk Management ◽  
Financial Firms ◽  
Control Framework

Financial services firms are subject to various types of risks. In particular, operational risk is difficult to assess and can be devastating, although it is often perceived by a firm's management as being more controllable than the cost of managing other types of risks. Understanding the management problems associated with operational risk is crucial to the performance of the firm. In “Operational Risk Management: A Stochastic Control Framework with Preventive and Corrective Controls,” Xu, Zhu, and Pinedo introduce a general modeling framework for operational risk management for financial firms. They propose two types of controls and characterize the optimal control policies. They apply their model to a data set from a commercial bank, and through a proper investment strategy, one can achieve a significant performance improvement.

scholarly journals Dividend Policy of Indonesian State-Owned Enterprises

Telaah Bisnis ◽  
2018 ◽  
Vol 18 (1) ◽  
Author(s):  
Wahyuni Rusliyana Sari
Keyword(s):  
Firm Size ◽  
Ownership Structure ◽  
Dividend Policy ◽  
Stock Exchange ◽  
Business Risk ◽  
Financial Leverage ◽  
Growth Opportunities ◽  
Global Crisis ◽  
Dividend Payout ◽  
The Impact

Abstract The purpose of this research is to identify the factors that influence the dividend policy. The model considered the impact of ownership structure, firm size, growth opportunities, financial leverage, profitability, business risk, age, previous year’s dividends, and global crisis 2008 on dividend payout ratio. Sample in this research is state-owned enterprises listed in Indonesian Stock Exchange between the years from 2004-2013. With using purposive sampling, the total of the sample in this research is 8 state-owned companies. The methodology of this research was multiple regression linier. The result of this research find that firm size, previous year’s divi­dends, and global crisis 2008 significant to dividend payout ratio. Ownership structure, growth opportunities, financial leverage, profitability, business risk, and age do not have significant to dividend payout ratio. This result indicates that the companies management has to consider firm size, previous year’s dividends, and global crisis 2008 in dividend payout ratio.

scholarly journals Analysis of Impacts of Operational Risk Management Practices on Banks’ Financial Performance: Study of Selected Commercial Banks in Nigeria

2020 ◽  
Vol 9 (1) ◽  
pp. 22-35
Author(s):  
Diekolola Oye
Keyword(s):  
Risk Management ◽  
Financial Performance ◽  
Commercial Banks ◽  
Management Practices ◽  
Secondary Data ◽  
Operational Risk ◽  
Multiple Regression Model ◽  
Performance Study ◽  
Operational Risk Management ◽  
The Impact

Increase in losses borne by banks as a result of inadequate operational risk management practices and the adverse impact on banks’ financial performance has been a major concern to bank management and regulators. This study analysed the impact of operational risk management practices on the financial performance of commercial banks in Nigeria. 10-years (2008 - 2017) secondary data extracted from audited financial statements of selected commercial banks in Nigeria was used for the study. The data was analysed using the Linear Multiple Regression Model. The results showed that there is a positive relationship between operational risk management and the financial performance of banks. The findings revealed that sound operational risk management practices impact positively on the financial performance of banks. We, therefore, recommend that banks’ management should deploy adequate resources towards understanding operational risk to ensure sound operational risk management and improved financial performance of banks.

scholarly journals Operational risk in bank governance and control: How to save capital requirement through a risk transfer strategy. Evidences from a simulated case study

2015 ◽  
Vol 5 (2) ◽  
pp. 142-159 ◽  
Author(s):  
Enzo Scannella ◽  
Giuseppe Blandi
Keyword(s):  
Risk Management ◽  
Operational Risk ◽  
Capital Requirement ◽  
Bank Capital ◽  
Regulatory Capital ◽  
Operational Risk Management ◽  
Risk Transfer ◽  
Loss Distribution Approach ◽  
Bank Capital Requirement ◽  
The Impact

Operational risk management in banking has assumed such importance during the last decade. It has become increasingly important to measure, manage, and assess the impact of operational risk in the economics of banking. The purpose of this paper is to demonstrate how an effective operational risk management provides mitigating effects on capital-at-risk in banking. The paper provides evidences that an implementation of an operational risk transfer strategy reduces bank capital requirement. The paper adopts the loss distribution approach, the Monte Carlo simulation, and copula methodologies to estimate the regulatory capital and simulate an operational risk transfer strategy in banking.

scholarly journals Do operational risk and corporate governance affect the banking industry of Pakistan?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Komal Altaf ◽  
Huma Ayub ◽  
Malik Shahzad Shabbir ◽  
Muhammad Usman
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Commercial Banks ◽  
Operational Risk ◽  
Primary Data ◽  
Monitoring And Control ◽  
Content Type ◽  
Operational Risk Management ◽  
And Control ◽  
The Impact

PurposeDue 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/approachOperational 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.FindingsResults indicate significant impact of CG and operational risk identification (ORI), monitoring and control on ORM practices in commercial banks of Pakistan.Originality/valueThe 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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