Application of Multi-Criteria Assessment in Banking Risk Management

Abstract

Banks face a number of business risks on a daily basis. Today, operational risk is dominant. The aim of this paper is to develop a decision-making system when choosing a method of operational risk management by using the Analytical Hierarchy Process (the AHP method) and the Fuzzy Analytic Hierarchy Process (the FAHP method). Analytical hierarchical process is a simple efficient process in solving decision-making problems. The final decision depends on the assessment of a set of alternatives and the decision criteria. The main purpose of the process is to find appropriate solutions for defined user factors in the current competitive environment. The results obtained by the classical AHP method, as well as the FAHP method, show that external factors are the dominant criterion, especially during the financial crisis or the Covid19 pandemic, and that solutions should be sought in international standards, using control tools created by the banks themselves.

An Assessment of the Impact of the COVID-19 Pandemic on Consumer Behavior Using the Analytic Hierarchy Process Model

“…Jurik, 2020 [17], views the decision making process as a chronological series of activities from defining the problem to choosing an alternative solution according to certain criteria. This prompted us to create a flowchart (Figure 3) for assessing the influence of COVID-19 indicators on individual consumption, highlighting important steps, from the selection of indicators to their consolidation [139,140]. Each step will be explained below.…”

“…Below, the inverse ratings of those above appear. According to Saaty's scale, above the diagonal of the matrix A, there are values from 1 to 9, and below them are the corresponding inverse values [139,140].…”

“…where A is the matrix of pairwise comparisons of the dimension nxn, w is the eigenvector representing the ranking or order of priority, λ is the maximum eigenvalue, which is the measure of the consistency, and e is the unit vector [139,140]. The final step in this phase involves calculating consistency.…”

Comparative Sensitivity Analysis of Some Fuzzy AHP Methods

“…Yadav and Lee conducted a study focused on the selection of zirconia, titanium oxide, and marble dust powder as fillers in dental restorative composite materials [22], funded by the Korean Ministry of Education. Ristanović et al developed a system for operational risk management within the finance sector [23]. Additionally, Ilić et al employed FAHP to prioritize strategies for implementing unmanned aircraft systems for the smart city transformation in Belgrade, the capital of the Republic of Serbia [24].…”