THE USE OF KEY RISK INDICATORS BY BANKS AS AN OPERATIONAL RISK MANAGEMENT TOOL: A SOUTH AFRICAN PERSPECTIVE

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Abstract

The use of key risk indicators as a management tool is one of the requirements for the calculation of a bank’s operational risk capital charge. This article provides insight into the use of key risk indicators as an operational risk management tool by South African banks and indicates their level of preparedness to comply with the criteria. The results of a questionnaire aimed at junior and middle management indicated that banks are not suitably prepared to implement a key risk indicator management process and have a general lack of understanding of the underlying theory and concept of the criteria to use key risk indicators. The advantages of using key risk indicators are not fully exploited and more benefits can be realised by raising awareness in this regard.

Keywords: Operational Risk, Key Risk Indicators, Quantitative and Qualitative Risk Management Criteria, Risk And Control Self-Assessments, Loss Event Database, Risk Appetite, Risk Thresholds, Early Warning, Risk Reporting

How to cite this paper: Young, J. (2012). The use of key risk indicators by banks as an operational risk management tool: A South African perspective. Corporate Ownership & Control, 9(3-1), 172-185. https://doi.org/10.22495/cocv9i3c1art2