Title: The process of managing operational risk as an 'innovative' bank risk type: a case study from Bosnia and Herzegovina

Authors: Emira Kozarevic; Safet Kozarevic

Addresses: Faculty of Economics, University of Tuzla, Univerzitetska 8, 75000 Tuzla, Bosnia and Herzegovina ' Faculty of Economics, University of Tuzla, Univerzitetska 8, 75000 Tuzla, Bosnia and Herzegovina

Abstract: Despite the fact that operational risks are as old as banks, operational risk management has become one of the new challenges for bank management since they face the new capital accord (i.e., Basel II). Basel II 'opened the door' to operational risks and proposed specific rules for operational risk management, including approaches for evaluation of these risks as well as calculation the level of the required capital. Hence, this can be viewed as an 'innovative' bank risk type and, in the paper, we discuss specificities of managing of operational risks with a focus on the banking sector of Bosnia and Herzegovina. Operational risks depend on the level of market development (emerging or developed). Since they are higher in emerging markets (such as Bosnia and Herzegovina), investment in decision support systems should aim to reduce operational risks exposure.

Keywords: operational risks; risk management; Bosnia and Herzegovina; banking industry; bank risk types; case study; bank management; new capital accord; Basel II; risk assessment; emerging markets; decision support systems; DSS investment.

DOI: 10.1504/IJFIB.2016.076596

International Journal of Financial Innovation in Banking, 2016 Vol.1 No.1/2, pp.3 - 28

Received: 05 Dec 2014
Accepted: 19 Mar 2015

Published online: 16 May 2016 *

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