Journal of Operational Risk

Marcelo Cruz

Editor-in-chief

Welcome to the third issue of Volume 20 of The Journal of Operational Risk.

The growing integration of artificial intelligence (AI) into core business processes has prompted regulators worldwide to push for AI oversight legislation that ensures transparency, fairness and safety in automated decision-making. These laws, such as the European Union’s AI Act (Regulation (EU) 2024/1689) and emerging US state-level regulations, require organizations to establish governance mechanisms for monitoring, testing and documenting AI model behavior throughout its life cycle. Within enterprise risk management (ERM) frameworks, this translates to embedding algorithmic accountability: ensuring AI-driven processes are explainable, auditable and compliant with ethical and legal standards. Risk functions must now assess AI models not only for performance and operational continuity but also for potential biases, unintended consequences and resilience under adverse scenarios. This shift challenges firms to integrate multidisciplinary oversight – combining data science, compliance, IT security and legal expertise – into ERM to manage the operational, reputational and regulatory risks of AI at scale.

ERM is a broad subject, encompassing establishing risk policies and procedures; implementing firm-wide controls; risk aggregation; revamping risk organization; and internal audit. Given the as-yet relatively sparse ERM literature highlighted in the bibliometric analysis included in this issue, the editorial board would be interested to see more discussions on these aspects in relation to AI, as well as papers that discuss applications of machine learning (ML) techniques – one of the industry’s hot topics – and papers on cyber and IT risks (not just their quantification but also better ways to manage them). Analytical papers on operational risk measurement are also keenly sought, particularly those that focus on stress testing and managing operational risk.

RESEARCH PAPERS

With the continuous development of the metaverse and the deepening of people’s understanding of it, its internal activities and interactions have become increasingly complex, leading to discussions on how to effectively regulate various behaviors in the metaverse. In the issue’s first paper, “Risk prevention and regulatory challenges in metaverse trading”, Xiangbin Zuo and Huanhuan Ding focus on the metaverse’s regulatory model, which aims to ensure that activities in the metaverse are carried out within a framework of legality, morality and security. The authors first define the regulation of digital asset transactions and explore the role of financial regulatory agencies. They then delve into the censorship and filtering of content in the metaverse, especially the question of how to handle illegal content and address copyright issues. Zuo and Ding also elaborate on the importance of identity authentication, while emphasizing the necessity of protecting user privacy. They focus in particular on virtual land and real estate development, analyzing the definition and attributes of virtual land and how to plan its development and utilization. In addition, they also explore the characteristics of digital currency transactions and propose strategies and rules for preventing money laundering.

In the second paper in the issue, ‘Addressing climate-related risks in banking: a framework for sustainable risk management and regulatory alignment”, Neha Chhabra Roy investigates the need for Indian banks to develop an adaptive and structured response framework for managing climate-related risks. Her study proposes a dual-layer approach to climate-related risk that integrates root-cause-based analysis with severity assessment to prioritize and address such risks. Using sectoral impact analysis, risk prioritization and risk driver identification, the analysis employs advanced methodologies, including a random forest ML model and correlation analysis, to develop a data-driven climate-related risk–response system. Duallayer mitigation ensures both the underlying causes and the impacts of risk are systematically considered, improving the accuracy and effectiveness of climate risk response. By improving financial institutions’ risk assessment, loan planning and decision-making capabilities, the proposed framework aims to strengthen climate resilience. This study provides actionable insights and practical tools for banks, regulators and industry stakeholders, promoting sustainable practices and enhancing climate resilience.

Our third paper, “Perceived workplace accident frequency and its impact on employee withholding behaviors and perceived productivity” by Toufik Serradj and Amal Saidani, investigates the importance of employee perception, specifically around safety, as employees’ attitudes and behaviors are shaped by their subjective assessments of workplace conditions rather than by objective metrics. The authors examine the relationship between the perceived frequency of workplace accidents, employee withholding behaviors (ie, deliberately reducing their effort and engagement while remaining with an organization) and perceived productivity, in an Algerian context, as well as the moderating effects of perceived risk and proactive communication of safety measures. Based on a sample of 453 employees, from large and mid-sized enterprises across various high-risk industries, the research tests five hypotheses:

• the negative impact of the perceived frequency of workplace accidents on perceived productivity;
• the negative correlation between employee withholding and perceived productivity;
• the mediating role of employee withholding in the link between perceived accident frequency and perceived productivity;
• the moderating role of perceived risk in this relationship; and
• the attenuating effect of proactive safety communication.

The results support the first four hypotheses and partially support the fifth, showing that a higher perceived frequency of workplace accidents is associated with increased withholding behaviors, which in turn are negatively related to perceived productivity. Moreover, employees’ perceived risk as well as proactive communication of safety measures significantly moderate these effects. The paper’s findings underline the importance of addressing subjective risk assessments and safety communication strategies as part of an integrated workplace safety and performance management approach.

In the issue’s fourth paper, “Mapping the influence of enterprise risk management: a systematic review and bibliometric analysis”, Zhangwei Zheng, Hafizuddin-Syah B. A. M., Hafizah Omar Zaki and Qin Lingda Tan investigate the influence of ERM through bibliometric analysis and a systematic review using the theory–context– method framework. Their analysis of 135 Scopus-indexed documents, including 27 high-quality journal articles, highlights global trends, thematic clusters and emerging topics in ERM. Performance analysis reveals a sustained interest in ERM, with significant geographic and institutional disparities. Six thematic clusters reveal critical research areas, while emerging topics include ERM’s integration with digital transformation and sector-specific applications. The theory–context–method analysis highlights the dominance of ERM theory and the use of quantitative regression methods, in the United States in particular. The systematic review confirms that ERM generally enhances firm performance, particularly in mature stages of implementation, though mixed results in some contexts highlight the need for further exploration of mediating factors. By integrating bibliometric and systematic review methodologies, this paper provides a comprehensive overview of ERM research, offering valuable insights to guide future theoretical, methodological and practical advances.