Operating Risk

Operating risk is associated with the operations of the bank. Operations include human resources, technologies, applications, and management information systems. All these entail expenses. If operating expenses are high, profit will be low. Big banks have large operating expenses. Human resources need to be properly screened, selected, and trained to avoid fraud. Technologies should be the latest to provide efficient and cost-effective services. The computer application used by banks should support service delivery and an in-built control system. Management information systems should facilitate effective and timely decision-making. Operating cost is high with banks where technology and systems are compromised. Bank must devise a system to calculate per-employee assets and expense/profit and compare the same with industry standards to evaluate operating risk. Operating risk is difficult to identify and assess, however, the facts mentioned above may help reduce such costs and increase profit.