Operational RiskManagement Improvements within Internal Control Frameworks

Abstract: Operational Risk Management has gained attentions to itself in the recent years. Although a liquidity crisis, but Global Financial Crisis has had impacts on all areas of risk namely operational risk at financial institutions. Lessons learned by banks from the crisis forced radical changes in operational risk management structure which in turn led to many challenges. Focusing on literature and by conducting a case study on operational risk management on one of Sweden’s largest retail banks, this thesis aims on answering how operational risk management has improved by implicating risk governance and internal control frameworks. This will be achieved by getting a better understanding of critical risks threatening this bank.The outcome of this study revealed that loss of reputation as a result of problems within IT system risks together with external card fraud are among the most common risks that banks should take into consideration when managing operational risks. It was concluded that although improvements have taken place in how operational risks are being managed, there is still room for improvements. Internal control frameworks still need to be modified by regulators to be more efficient while there should be reasonable amount of regulations applicable to banks.