New Tendencies in Operational Risk Management in Banks: Challenges and Opportunities


  • Jelena Sobanova University of Latvia
  • Marina Kudinska University of Latvia



bank operational risk, operational risk management


The importance of operational risk management in the bank increases every year. Banks need to take actions to prevent fraudulent activities, minimize errors in transactions, automate processes and improve data security. Ignoring operational risk procedures or failure to implement suitable control mechanisms could lead to unexpected losses, unsatisfied customers, and potentially regulatory sanctions, all of which could seriously harm bank’s reputation in a highly competitive market. A specific focus is on payments and security transactions, as they are linked to the biggest risks. Any regulatory driven project failure or IT project failure in the bank, insufficient project governance, failed implementation of a new system or failure in external data sources can lead to even bigger losses. After a review of the Basel Framework and the new set of standards of the upcoming changes to take effect as of 2023, the aim of this article is to elucidate the changes related to operational risk capital in banks and to ascertain the weakest points in operational risk management. Therefore, this topic is timely relevant, as the aim of the research is to manifest the possible changes withing operational risk management in banks, by gathering and analysing empirical evidence. This article is based on academic research and professional experience. The methods used in the research are comparison, generalization and graphical illustration of statistical information, identification of the main idea of regulatory frameworks and legal documentation. The main results and findings of the research are that banks will need to rethink the strategies of their capital management and this article emphasizes the importance of a redesigned approach towards operational risk assessment in Basel III and substantiates the efficiency of the proposed framework. With Basel III, each loss may cause more challenges, as will be considered twice, as the direct impact on profit/loss and direct impact on future operational risk capital. Another finding is that the biggest amounts of losses are related to corporate items events and according to the static data taken from ORX membership community, top five monthly losses are far from normal distribution. Important finding was that most of the banks were not prepared for COVID-19-pandemic and had to review operational risk procedures immediately to secure their business in working from home environment, meaning that gap in operational risk management existed already before COVID-19-pandemic.


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How to Cite

Sobanova, J., & Kudinska, M. (2022). New Tendencies in Operational Risk Management in Banks: Challenges and Opportunities. Humanities and Social Sciences Latvia, 30(1, 2), 108–125.