Of the main areas of risk management, operational risk is has the shortest history, with the industry beginning to give it serious consideration only 25 years ago. In that time, the industry has made great strides in both the definition and quantification of operational risk. The Journal of Operational Risk has been publishing papers at the forefront of this development since its inception.
On the quantification side, significant progress has been made, with major banks disclosing their operational risk exposures on a yearly basis. For many financial institutions their operational risk exposure is higher than that of market and credit risks. One large operational risk event can be lethal to a financial firm. Operational risk is thus a key concern for the industry as well as for the regulators that supervise financial institutions.
On the definition side, the industry has recently introduced the concept of “Non-Financial Risk” encompassing not just the early definition of operational risk but other risks like strategic, people, cyber, IT, etc. A broader view of operational risk would also consider Enterprise Risk Management, Cyber Risk Management, Information Technology Risks, Data Quality Risks amongst others. The introduction of new technologies like machine learning, artificial intelligence alongside new quantification ideas makes operational risk an intriguing risk domain with a green field for development and implementation of new ideas and theories.
With that in mind, The Journal of Operational Risk welcomes papers on non-financial risks as well as topics including, but not limited to, the following.
- The modeling and management of operational risk;
- Recent advances in techniques used to model operational risk, e.g., copulas, correlation, aggregate loss distributions, Bayesian methods and extreme value theory;
- The pricing and hedging of operational risk and/or any risk transfer techniques;
- Data modeling external loss data, business control factors and scenario analysis;
- Models used to aggregate different types of data;
- Causal models that link key risk indicators and macroeconomic factors to operational losses;
- Regulatory issues, such as Basel II or any other local regulatory issue;
- Enterprise risk management;
- Cyber risk management;
- IT risk management (how systems errors/fails impact an organization and change their risk profile);
- Big data applications to non-financial risk;
- Artificial intelligence and machine learning applications to risk management;
- Qualitative analysis of non-financial risks.
Journal Impact Factor: 0.645
5-Year Impact Factor: 0.488
The authors summarise ways that machine learning can help categorize textual descriptions of operational loss events into Basel II event types.
The author investigates the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and its most prominent cases, as well as detailing examples of operational risk events that the commission did not cover.
The author outlines characteristics of machine learning classifiers, compares methods for dealing with imbalanced data issues, and proposes terms of best practice in model development, evaluation, and validation.
This paper presents a means to estimate very large losses by supposing the event is the result of a succession of factors and estimating the probability of each factor.
The Compliance Index: a behavioral approach to compliance risk management in the (post-) Covid-19 era
This paper proposes the Compliance Index - a behavioral measurement system for controlling and monitoring the effectiveness of compliance programs to mitigate compliance risk - designed in response to the shift to remote working during the Covid-19…
How does the pandemic change operational risk? Evidence from textual risk disclosures in financial reports
The authors investigate changes in operational risk profiles of the financial industry following the Covid-19 pandemic.
This paper introduces existing and novel epidemiology models and investigates how government responses to the Covid-19 pandemic impacted these models.
The authors investigate the operational risk impact of the Covid-19 pandemic on Chinese commercial banks and the moderating effect of bank size, business diversification and regulatory records.
This paper uses the ten laws of operational risk along with taxonomies for inadequacies or failures and their impacts, and it also draws parallels with past crises, in order to make systematic predictions.
The paper presents an analysis of correlation effects of economic factors on the operational risk losses of a medium-large UK retail bank, and it recommends that causal factors that effect operational risk should be identified.
This paper examines how people risk is managed in banks using interview data obtained from operational risk management experts working in the UK banking sector.
This study focuses on the foundational technology of fintech to address the challenges posed by its specific form of risk.
In this paper, the authors investigate financial fraud in companies listed on the Athens Stock Exchange during the period 2008–18 and propose a model to detect fraudulent financial statements.
This paper revisits the linkage between internal audit function characteristics and internal control quality and proposes a random polynomial model for assessing ICQ.
In this study, different value-at-risk models, which are used to measure market risk, are analyzed under different estimation approaches and backtested with an alternative strategy.
In this paper, the authors propose a family of copula-based multivariate distributions with g-and-h marginals.
This study aims to test the sufficiency of the solvency capital requirement approach for calculating operational risk using the standard formula as defined in Solvency II.
The role of management accounting practices in operational risk management: the case of Palestinian commercial banks
This paper follows an exploratory, descriptive approach to investigate the role that management accounting practices plays in managing operational risks in the Palestinian commercial banking sector.
Fighting Covid-19 in countries and operational risk in banks: similarities in risk management processes
This paper shows how banks managing operational risk and countries tackling Covid-19 could learn from each other to overcome obstacles in effectively mitigating major risks.