ØOperation risk is the composite
of all those events either internal or external to the bank that can impede
its operation or the routine activities. Operational risk can emerge from the
people, systems, and processes over which bank operates.
a. Accounting risk arises due to
incorrect entry on accounts or infrequent accounting information, which is
used for internal decision-making or external reporting.
b. Control risk stands for the
probability of loss that would arise from the ineffectiveness of internal
control system of the bank. An ineffective internal control system increases
the likelihood of control risk.
c. Disaster risk is cluster of all
those external or environmental shocks that are beyond the bound of control of
the bank such as natural disasters, terrorism and so on.
d. Human Resource risk is connected
with human resource of the bank. Such risk can be the outcome of either intentional or accidental
behaviour of the employees. Inadequacy in knowledge and skill level,
inappropriate placement, low level of employee morale, motivation and
commitment etc. can be the inducer of such type of risk.