Operational Risk in Banks – Revolution or Regulatory Evolution

Koleśnik, Jan

doi:10.15611/pn.2018.509.14

Cited by 3 publications

(5 citation statements)

References 3 publications

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“…The ratings are measured on an open-ended scale starting at 0 (i.e., no unmanaged risk) and, for 95% of cases, a maximum score below 50 [113]. Depending on their individual quantitative score, companies are assigned to one of five risk categories: negligible [0-10), low [10][11][12][13][14][15][16][17][18][19][20], medium [20][21][22][23][24][25][26][27][28][29][30], high [30][31][32][33][34][35][36][37][38][39][40], and severe (equal to or above 40).…”

Section: Methodsmentioning

confidence: 99%

“…In general, the very existence and viability of banks are almost entirely dependent on reputation and public trust. Banks are therefore both highly exposed and sensitive to ESG-related concerns, which directly affects the riskiness [12] and profitability [11] of their activities. Given the above, banks, even more than other industries, should be motivated to follow the principles of CSR and efficiently manage ESG risk [10].…”

Section: The Impact Of Size On Financial Performance Risk and Esg Per...mentioning

confidence: 99%

“…Furthermore, it seems that the principles of corporate social responsibility were not actually followed in the everyday business practices of many banks until the outbreak of the global financial crisis in 2008, and the resulting shift in their strategies and business models towards a broader and deeper incorporation of ESG concerns might be, to a large extent, an attempt to restore the sector's damaged reputation [10]. With the passing of time, however, banks seem to increasingly appreciate the benefits of ESG frameworks as a useful tool for the mitigation of operational [12,13] and credit [14] risk, reductions in the cost of equity [15,16] and liabilities [17,18], and ultimately, an important driver of their overall financial performance [19][20][21].…”

Section: Introductionmentioning

confidence: 99%

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Does Firm Size Matter for ESG Risk? Cross-Sectional Evidence from the Banking Industry

Bolibok

2024

Sustainability

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The ambiguous evidence regarding the linkages between firm size and ESG risk in the relevant literature justifies the need for their further scientific investigation. A particularly interesting context for this task is offered by the banking industry, where financial institutions face both strong incentives to expand the scale of their activities and high reputational risk sensitivity. Given the above, this paper aims to systematize and enhance the theoretical underpinnings of the relationship between firm size and ESG risk in banks, highlighting its likely non-linear character, and to investigate it empirically in the cross-section of the international banking industry. This research employs uni- and multivariate, and linear and non-linear regression analyses applied to a sample of 668 banks that were assigned the Morningstar Sustainalytics ESG Risk Rating for the year 2021. The results demonstrate that, although, on average, size seems to be associated negatively with ESG risk in the cross-section, the relationship is in fact non-linear and follows a U-shaped pattern. The findings are robust regarding the impact of both country-specific contextual factors and outliers. This study emphasizes the importance of diseconomies of scale in ESG risk management, thus offering some important lessons and recommendations for bank executives and equity investors.

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Section: Methodsmentioning

confidence: 99%

Section: The Impact Of Size On Financial Performance Risk and Esg Per...mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Does Firm Size Matter for ESG Risk? Cross-Sectional Evidence from the Banking Industry

Bolibok

2024

Sustainability

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“…However, assuming that a bank uses adequately automated partial processes, it is possible to implement the optimizing algorithms in the IT systems, which would be responsible for shaping the internal demand through the funds transfer rates. Such a solution would not only address the expectations related to the new regulations in the field of capital requirements due to operational risk (Koleśnik, 2018), but also eliminate the weakest link in the decision-making process, namely the human factor with all its shortcomings: lack of adequate knowledge, inaccurate evaluation of reality, precarious conditions of uncertainty and pressure of fear, or lack of possibility to quickly assess the actual risk level in a reliable way.…”

Section: Objectives and Assumptions Of The Modelmentioning

confidence: 99%

Optimization of the Bank‘s Value in Conditions of Globalisation and Permanent Crisis

Koleśnik¹,

Nadolski²

2021

ERSJ

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Purpose: The aim of this article is to present the conceptual model of integrated optimization of bank's value, which enables the integration of the risk management process with business processes while maintaining an optimal compromise between the safety (stability) of the bank's operations and striving to maximize its value. Design/Methodology/Approach: In the model used the hitherto achievements of various fields of science that are applicable in banking activities and the process of bank management, synthesized them and applied to solve contemporary dilemmas that pose a challenge in the difficult and dynamically changing economic reality. Findings: As a result of the literature review, an in-depth analysis of the practice of the management methods and techniques used and the current dilemmas facing the banking sector, it was found that it was possible to formulate a financial management model for a bank, which, apart from the possibility of automation and an integrated approach to the management process, enables a sustainable and optimal development of the bank's operations. Practical Implications: The aim of the model is the possibility of gaining a long-term competitive advantage in conditions of increasing globalisation, permanent threat of a crisis resulting from integration of financial markets and intensification of the contagion effect, growing competition which exerts pressure on operational efficacy, as well as shortcomings and unreliability of the markets. The model addresses the dilemmas currently facing the banking sector in view of the important structural and regulatory changes, which are of significant importance for maintaining and improving its stability. Originality/Value: The model aims at providing a complex solution to such dilemmas as shaping the bank value ex ante not ex post. Its additional quality is a modular, multi-variant and two-directional structure. This structure in practice increases flexibility of model's implementation, its application in the banks which use different technological, methodological and organizational solutions, and formulation of optimization problems.

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“…Since banks are inherently more exposed to the risk of reputation than other industries, they are also more vulnerable to criticism from their stakeholders and customers [4]. Not surprisingly, therefore, they are highly sensitive to environmental, social, and governance (ESG) risk, as it may directly affect both their financial performance [5] and an overall operational risk exposure [6].…”

Section: Introductionmentioning

confidence: 99%

The Impact of Social Responsibility Performance on the Value Relevance of Financial Data in the Banking Sector: Evidence from Poland

Bolibok

2021

Sustainability

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Corporate social responsibility (CSR) is inevitably becoming an increasingly important part of almost every business. This is particularly true for the banking industry, which suffered substantial losses in reputation and public trust in the aftermath of the global financial crisis. Not surprisingly therefore, banks around the world have visibly intensified their CSR efforts. One of the key dimensions of CSR regards the reliability and transparency of a firm’s communication with the market, which suggests that information disclosed by responsible companies may be more value relevant. The related evidence, especially in the banking sector, is however modest and mixed. The paper aims, therefore, at empirical investigation of the impact of social responsibility performance on the value relevance of financial data in the Polish banking sector. The research employs multivariate regression analysis based on the Ohlson model and the Chow test for structural breaks. The examined sample covers 154 bank-year observations of 17 banks listed on the Warsaw Stock Exchange from 2009–2020. The results suggest that financial disclosures of banks included in CSR indices are generally more value relevant. Additionally, more responsible banks exhibit higher (lower) responsiveness of market values to net earnings (book values of equity) compared to their less socially responsible counterparts.

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Operational Risk in Banks – Revolution or Regulatory Evolution

Cited by 3 publications

References 3 publications

Does Firm Size Matter for ESG Risk? Cross-Sectional Evidence from the Banking Industry

Does Firm Size Matter for ESG Risk? Cross-Sectional Evidence from the Banking Industry

Optimization of the Bank‘s Value in Conditions of Globalisation and Permanent Crisis

The Impact of Social Responsibility Performance on the Value Relevance of Financial Data in the Banking Sector: Evidence from Poland

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