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6. Corporate Governance angle does no form part of operations risk.

2.3.4. Distinction between Operational Risk and Operational Crisis

Operational risk is an all - inclusive concept covering :-

Ø intra -organizational ( internal ) risks such as those related to people, processes and systems;

Ø external events such as natural calamities, terrorism etc.

In case of extreme external events such as natural catastrophes, there is no real distinction between operational risk and operations risk since such an event requires crisis management initiative. But a routine operational risk management dose requires operational crisis management to avert serious consequences.

The points of distinction are enumerated as under:

Operational Risk

Operational Crisis

1. Operational Risk includes elements of Expected and unexpected (expected loss such as loss in process errors of say 0.1% of gross income).

1. Operational Crises covers only unexpected loss.

2. The continuity of business is not affected if some operational risk events do not have serious implications on organization's position (say, internal fraud of 0.1% of annual net profit).

2. An organization's continuity may be seriously affected if the crisis event is catastrophic.

3. Operational risk management dose not generally imply disaster recovery.

3. Operational crisis management generally involves disaster recovery.

4. Operational risk factors do not generally trigger off reputational risk (a minor processing error in a customer's savings account may not effect the bank's reputation).

4. Crisis event may sometimes (e.g. product failure, contamination etc., Union Carbide Gas leak incident in MP) triggers off reputational risk leading to fall in market share, equity share price etc.

5. Operational risk management in generally concerned with two phases:

i. incident

ii. recovery

5. Operational crisis management generally involves three phase;

i. incident

ii. recovery

iii. continuity

6. Operational risk may not always turn out to be a danger.

6. Operational crisis is generally of a ‘moment of danger.'

2.3.5. Effective way of managing Operational Risk

Poor operational risk management, especially in the banking sector, may generate serious financial losses caused by

Ø external/internal fraud,

Ø system failure,

Ø and other related operational lapses.

Damage to a bank's reputation, even if it is a private bank, may also be severe.

Ø Effective operational risk management provides boosts sale by taking care of the following:

Ø It tends to minimize severity or frequency of operational risk loses.

Ø It creates a mechanism to optimize operational effectiveness throughout the bank.

Ø Various business portfolios are better managed if the processes, 本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。