Integration of a Risk Management System in Business
Today, many organisations are exposed to various risks during their operations of activities. As the aim of both private and public firms is to achieve their objectives, monitor, and reduce risks, it is essential for enterprises to identify effective ways to manage and control the key jeopardies. Besides, risk management is a necessary concept that relates to safety and financial integrity of a business and a substantial part that involves the strategic development of businesses (Fischer et al., 2010; Mitschele, Schlottmann, and Seese 2008). For instance, in the banking industry, the major categories of risks include operational risks, market, and credit. In addition, most banks are facing other risks such as legal, regulatory, reputational, exchange risks, interest rates, and liquidity risks (El-Kharouf and Magdalena 1999; Tumenbayeva and Zhaksybekova 2016). Thus, this study will focus on investigating on the objective of an integrated risk management system, and its contribution to banking organisations’ prosperity.
Objective of the Study
Primary Objective
The primary objective of this study is to encourage banks in Australia to develop integrated risk management model in order to obtain an ability to monitor and manage their risks effectively so that they can assure their customers that their goals are fully meet and no risks will affect the industry.
Secondary Objectives
- First, is to examine the risks that most of the financial institutions in Australia deal with in order to succeed in the business.
- The other objective is to explain the main elements of a successfully integrated risks management system for the banking industry.
- To identify strategies that Australian commercial institution applies when aggregating operational risks.
- To outline the structure of the integrated risk management system and the way it is vested to monitor related financial risks.
Literature Review
In both developed and developing states all over the world, there have been many failures in different industries and the commercial sectors due to the poor risks management (Agwu et al., 2015; Kosmidou 2008). In agreement with this argument, Golat (2016) has said that if direct or indirect financial exposures exist between banks and their wealth management, there will be a risk of contagion between the businesses. According to the Padró (2014); Pakhchanyan (2016), operational risks are among the key form of hazards that most banks in Europe and other parts of the world are facing. Li, Yang, and Li (2016) reveal that in the cases where banks are faced with operational and compliance threats, the financial institutions encounters irreparable damage, which may destroy their reputation and efficiency to serve the esteemed customers who rely on their services. Hussain and Shafi (2014); Berg (2010) point out that most of the risks that banks encounter include issues such as credit, and operational threats have become an area of focus for the financial industry, along with the employees working in the sector being considered as the significant source of these risks. Thus, it is worthwhile for the financial businesses in Australia to find why it is fundamental to integrate a risk management system to their operations, as it will enhance efficiency, increase productivity, and facilitate sustainability.
Research Methodology
To answer the research question, the investigator will review studies conducted on the topic of risk management system in the financial institutions of Australia. The basic materials that researcher will use to fetch useful data include published journals, case studies, and integrated risk management textbooks that have essential information regarding the topic of this study. As such, secondary data will assist the surveyor in getting an opportunity to compare opinions of different researchers and come up with reliable and valid data concerning the investigation’s problem.
Conceptual Framework
Figure 1: Conceptual Framework.
Reference List
Agwu, M. E., Iyoha, F. O., Ikpefan, O. A., & Atuma, O. (2015). Strategic management of operational risks in financial institutions. European Journal of Business, Economics and Accountancy, vol. 3, no. 1, pp. 1-20.
Berg, H.P., 2010. Risk management: procedures, methods, and experiences. Risk Management, vol. 1, no.17, pp.79-95.
El-Kharouf, F. and Magdalena, M., 1999. Basic Element of an integrated Risk management system. The Arab Bank Review, vol. 1, no.1, pp. 18-21.
Fischer, K., Leidel, K., Riemann, A. and Wilhelm Alfen, H., 2010. An integrated risk management system (IRMS) for PPP projects. Journal of Financial Management of Property and Construction, vol. 15, no. 3. pp. 260-282.
Golat, T., 2016. Banks’ Wealth Management Activities in Australia. New Banknotes: From Concept to Circulation 1 Sensitivity of Australian Trade to the Exchange Rate 13 The Household Cash Flow Channel of Monetary Policy 21 Chinese Household Income, Consumption, and Savings 31 Developments in the Australian Repo Market 41, pp. 53-60.
Hussain, M.S. and Shafi, M., 2014. Operational risk in banks: a review. Elk Asia Pacific Journal of Finance and Risk Management, vol. 5, no. 2, pp. 1-12.
Kosmidou, K., 2008. The determinants of banks’ profits in Greece during the period of EU financial integration. Managerial Finance, vol. 34, no. pp. 146-159.
Li, Z., Yang, S. and Li, Z., 2016. Overview of risk management system of commercial bank data center. International Journal of Security and Its Applications, Vol. 10, no. 3, pp. 245-258.
Mitschele, A., Schlottmann, F. and Seese, D., 2008. Integrated risk management: risk aggregation and allocation using intelligent systems. In Computational Methods in Financial Engineering, pp. 317-342.
Padró, F.F., 2014. A conceptual framework on establishing a risk management framework within existing university assessment and evaluation practices. Studies in Learning, Evaluation, Innovation and Development, vol. 10, no. 1, pp. 1-13.
Pakhchanyan, S., 2016. Operational risk management in financial institutions: A literature review. International Journal of Financial Studies, vol. 4, no. 4, pp. 1-21
Tumenbayeva, O.S. and Zhaksybekova, G.N., 2016. Implementation of the integrated system of risk management in the Banks of Kazakhstan. Indian Journal of Science and Technology, vol. 9, no. 5, pp. 1-8.
