The measurement and management of operational risk in South African co–operative banks

Abstract

Co-operative banks have proved to be of paramount importance to the South African banking sector. Although relatively new, these banks have proven that their existence, especially in South African, has encouraged millions of individuals to save, and in turn, enabled them to strive for a better standard of living. The proper measuring and managing of operational risk within these banks will ensure the optimal functioning of these banks. Without the appropriate operational risk measurement and management, the daily operations of co-operative banks could result in losses, which would impact the members/shareholders negatively, and in turn, discourage savings. The primary objective of this study is to identify the current manner in which co-operative banks, especially in South Africa, measure and manage operational risk. This study will discuss the current approaches used by co-operative banks and the limitations to these approaches. The secondary objective of this study is to provide recommendations on how to improve these methods in order to measure and manage operational risk using the most effective method.