Operational Risk Disclosure Practices in Emerging Economies

Abstract

Risk disclosures provide an insight into the risk management policies and practices adopted by institutions and are useful in assessing the risk for various stakeholder groups. With the increasing incidence and complexity of operational risks in banks, it is imperative for banks to establish and follow suitable operational risk disclosure practices. The chapter attempts to examine the operational risk disclosure practices and the impact of bank specific characteristics on disclosure practices among Indian banks. Findings indicate disclosure levels to be inadequate, showing an insignificant improvement over the years. Bank profitability and depositor confidence significantly impact disclosure practices. The authors suggest that Indian banks should enhance their current operational risk disclosure levels to communicate to the stakeholders about the strength of their operational risk management framework. The Reserve Bank of India may issue new guidelines with respect to minimum disclosure requirements on operational risk to improve the quality of disclosures.