Selection of Key Risk Indicators for the operational risk management in bank
Journal Title: Zarządzanie i Finanse - Year 2013, Vol 11, Issue 2
Abstract
Key Risk Indicators (KRI - Key Risk Indicators) are part of the operational risk management system in banks. Their quantitative and qualitative nature allows not only to determine the level of operational risk, but also to put the operational events in the wider context of the overall operational risk management. Key Risk Indicators are statistics and / or measures, often financial, under which you can determine, among others, the bank's sensitivity to risk, including operational risk. A particularly important step is the step of selecting a Key Risk Indicators. Selecting the proper KRI system for specific financial institution involves both knowledge and experience of responsible management staff, on the other hand an access to the relevant data, both historical and current. An attempt to eliminate the problem of intuitive of Key Risk Indicators se-lection by operational risk management staff may be the method of hierarchical analysis of the problem (AHP - Analytic Hierarchy Process). The method is used to solve complex decision-making tasks involving the selection of the alternative set of different elements that meets the expectations expressed in the form of the main goal. Decision-making process in AHP consists of two main phases - phase of creating the hierarchical structure of decision-making and the evaluation phase. Creation of the hierarchy is crucial here, and usually requires expert knowledge of the field. The effect of the AHP method is the criteria ranking from the best to the least filling the main objective. Application of hierarchical analysis of the problem allows choosing a set that best meets the expectations of the bank as to the monitoring of areas of operational events actually having an impact on the size of operational risk. This method also allows determining the credibility of experts for the evaluation of various criteria, resulting in high reliability of the method.
Authors and Affiliations
Dariusz Garczyński
Keywords
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