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Table of Contents TOC o 1-3 h z u HYPERLINK l _Toc521338514 EXECUTIVE SUMMARY PAGEREF _Toc521338514 h 1 HYPERLINK l _Toc521338515 CHAPTER ONE INTRODUCTION PAGEREF _Toc521338515 h 2 HYPERLINK l _Toc521338516 GENERAL INTRODUCTION PAGEREF _Toc521338516 h 2 HYPERLINK l _Toc521338517 HISTORICAL BACKGROUND OF COMMERCIAL BANKS IN TANZANIA PAGEREF _Toc521338517 h 3 HYPERLINK l _Toc521338518 REASONS FOR INTRODUCING OPERATIONAL RISK PAGEREF _Toc521338518 h 3 HYPERLINK l _Toc521338519 STATEMENT OF THE PROBLEM PAGEREF _Toc521338519 h 5 HYPERLINK l _Toc521338520 RESEARCH OBJECTIVE PAGEREF _Toc521338520 h 5 HYPERLINK l _Toc521338521 RESEARCH QUESTIONS PAGEREF _Toc521338521 h 6 HYPERLINK l _Toc521338522 RELEVANCE OR IMPORTANCE OF THE STUDY PAGEREF _Toc521338522 h 6 HYPERLINK l _Toc521338523 SCOPE OF THE STUDY PAGEREF _Toc521338523 h 6 HYPERLINK l _Toc521338524 LIMITATION OF THE STUDY PAGEREF _Toc521338524 h 7 HYPERLINK l _Toc521338525 DELIMITATION OF THE STUDY PAGEREF _Toc521338525 h 7 HYPERLINK l _Toc521338526 CHAPTER TWO LITERATURE REVIEW PAGEREF _Toc521338526 h 7 HYPERLINK l _Toc521338527 Overview PAGEREF _Toc521338527 h 7 HYPERLINK l _Toc521338528 Definition of key terms PAGEREF _Toc521338528 h 8 HYPERLINK l _Toc521338529 2.2.1 Risk PAGEREF _Toc521338529 h 8 HYPERLINK l _Toc521338530 2.2.2 Risk management PAGEREF _Toc521338530 h 8 HYPERLINK l _Toc521338531 2.2.3 Market risk PAGEREF _Toc521338531 h 9 HYPERLINK l _Toc521338532 2.2.4 Credit risk PAGEREF _Toc521338532 h 9 HYPERLINK l _Toc521338533 2.2.5 Liquidity risk PAGEREF _Toc521338533 h 9 HYPERLINK l _Toc521338534 2.2.6 Operational risk PAGEREF _Toc521338534 h 10 HYPERLINK l _Toc521338535 Concepts of risk management PAGEREF _Toc521338535 h 10 HYPERLINK l _Toc521338536 Theoretical literature review PAGEREF _Toc521338536 h 10 HYPERLINK l _Toc521338537 2.4.1 Extreme value theory PAGEREF _Toc521338537 h 10 HYPERLINK l _Toc521338538 2.4.2 Regulation innovation theory PAGEREF _Toc521338538 h 11 HYPERLINK l _Toc521338539 2.4.3 Efficiency model theory PAGEREF _Toc521338539 h 11 HYPERLINK l _Toc521338540 Empirical Literature Review PAGEREF _Toc521338540 h 12 HYPERLINK l _Toc521338541 Conceptual framework PAGEREF _Toc521338541 h 13 HYPERLINK l _Toc521338542 Summary of Literature review PAGEREF _Toc521338542 h 13 HYPERLINK l _Toc521338543 Literature gap PAGEREF _Toc521338543 h 14 HYPERLINK l _Toc521338544 CHAPTER THREE RESEARCH METHODOLOGY PAGEREF _Toc521338544 h 14 HYPERLINK l _Toc521338545 Overview PAGEREF _Toc521338545 h 14 HYPERLINK l _Toc521338546 Research Design PAGEREF _Toc521338546 h 15 HYPERLINK l _Toc521338547 Population target PAGEREF _Toc521338547 h 15 HYPERLINK l _Toc521338548 Sampling procedure and sample selection PAGEREF _Toc521338548 h 16 HYPERLINK l _Toc521338549 Sampling procedure PAGEREF _Toc521338549 h 16 HYPERLINK l _Toc521338550 Study area PAGEREF _Toc521338550 h 16 HYPERLINK l _Toc521338551 Instruments of data collections PAGEREF _Toc521338551 h 16 HYPERLINK l _Toc521338552 Data analysis PAGEREF _Toc521338552 h 17 HYPERLINK l _Toc521338553 Ethical Considerations PAGEREF _Toc521338553 h 17 HYPERLINK l _Toc521338554 References PAGEREF _Toc521338554 h 18 HYPERLINK l _Toc521338555 Appendix I Questionnaire PAGEREF _Toc521338555 h 19 HYPERLINK l _Toc521338556 Appendix II Interview PAGEREF _Toc521338556 h 22 CHAPTER ONE INTRODUCTION GENERAL INTRODUCTION The financial sector in Tanzania is experiencing a number of losses which are caused by various factors. Among them are related to system multifunction, people, processes, and on another hand natural disaster. This scenario is directly related to operational risk, as the effects have been multiplied and caused severe losses to commercial banks. As the case, operational risk is posing to be a global agenda due to its effects on losses facing the sector. Other sectors being exposed to various losses, financial sectors in Tanzania need a close examination of operational risks since financial institutions operations are not isolated from operational risk environment. The recent challenges to Tanzanian financial sector in terms of risks and losses is vested in operational risk. Previously, operational risk was not recognised, were classified under fraud and embezzlement risk ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1007/978-1-137-44217-8,ISBN9781137442178,authordropping-particle,familyRobertson,givenDouglas,non-dropping-particle,parse-namesfalse,suffix,container-titleManaging Operational Risk Practical Strategies to Identify and Mitigate Operational Risk within Financial Institutions,idITEM-1,issueddate-parts2016,page1-190,titleManaging Operational Risk, Practical Strategies to Identify and Mitigate Operational Risk within Financial Institutions,typearticle-journal,urishttp//www.mendeley.com/documents/uuid3e19b01e-e22c-4c2d-89b2-0dfe4bbdeea1,mendeleyformattedCitation(Robertson, 2016),plainTextFormattedCitation(Robertson, 2016),previouslyFormattedCitation(Robertson, 2016),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Robertson, 2016). Substantial and frequent recorded financial losses necessitated thorough study, henceforth operational risk was introduced in the financial sector in 2001 by the Basel Committee on Banking Settlements ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1001/archsurg.136.9.1000,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,container-titleWorking Paper on the Regulatory Treatment of Operational Risk,idITEM-1,issue9,issueddate-parts2001,page30,titleWorking Paper on the Regulatory Treatment of Operational Risk,typearticle-journal,volume136,urishttp//www.mendeley.com/documents/uuidd4de7abf-ee73-435e-a26d-5623c8ad0f73,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2001c),manualFormatting(Basel Committee on Banking Supervision, 2001),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2001c),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2001c),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2001). The referred loss was known as operational losses due to their high profile, and uncertainty ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyThirlwell,givenJohn,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyBlunden,givenTony,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2013,number-of-pages354,publisherPearson Education, Inc.,publisher-placeHarlow CM20 JE, UK,titleMastering Operational Risk, A Practical guide to understanding operational risk and how to manage it.,typebook,urishttp//www.mendeley.com/documents/uuid70d54cc5-f4e4-404d-a30b-a5c75dfbab04,mendeleyformattedCitation(Thirlwell Blunden, 2013),plainTextFormattedCitation(Thirlwell Blunden, 2013),previouslyFormattedCitation(Thirlwell Blunden, 2013),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Thirlwell Blunden, 2013). There are various activities done by financial institutions to overcome losses, operational risk has remained unbeatable by its happening every time. It is observed that major losses are threatening the financial sector in Tanzania as losses keep on crystallising over the period, the financial institution sector is one of the main players of the economy and its impact could deteriorate the economy at large. The central bank of Tanzania issued a guideline on computing capital charge in regard to operational risk losses. Under this new guideline, each financial institution is required to adhere to it ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,idITEM-1,issue297,issueddate-parts2014,page1-45,titleThe Banking and Financial Institutions (Capital Adequacy) Regulations, 2014,typearticle-journal,urishttp//www.mendeley.com/documents/uuidc8e3caca-f552-4a07-879e-8895cb232613,mendeleyformattedCitation(BOT Banking Supervision, 2014),plainTextFormattedCitation(BOT Banking Supervision, 2014),previouslyFormattedCitation(BOT Banking Supervision, 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2014). As a regulator, the central bank of Tanzania (BOT) in 2008 issued guidelines on how commercial banks should focus on managing the risk. The guideline was reviewed and updated in 2010 as well as how the failure could affect the business ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). Consequently, there are various methods for modelling operational risk including capital charge as had been developed and adopted from Basel committee on banking supervision ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9789291315499,abstractRevised guidelines replacing the Good Practice Principles on Supervisory Colleges published in 2010. Aims to promote and strengthen operations of colleges and reflect observations on best practice. Incorporated recent supervisory developments eg information of crisis mgmt groups (CMGs) and greater focus on macroprudential considerations.,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,idITEM-1,issueJune,issueddate-parts2011,titlePrinciples for the sound management of Operational Risk Management,typearticle-journal,urishttp//www.mendeley.com/documents/uuid2b7df9f9-79f8-4d84-97a0-7f07208964c4,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2011),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2011),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2011),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2011), the central bank of Tanzania in 2014 adopted it and issued a regulation that operational risk will be pegged to capital ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,idITEM-1,issue297,issueddate-parts2014,page1-45,titleThe Banking and Financial Institutions (Capital Adequacy) Regulations, 2014,typearticle-journal,urishttp//www.mendeley.com/documents/uuidc8e3caca-f552-4a07-879e-8895cb232613,mendeleyformattedCitation(BOT Banking Supervision, 2014),plainTextFormattedCitation(BOT Banking Supervision, 2014),previouslyFormattedCitation(BOT Banking Supervision, 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2014). The regulation requires commercial banks and financial institution to set aside capital which will be charged as a result of operational risk losses. This creates challenges, however, on the other hand, it motivates the financial sector to be more precisely and to take a preventive measure on managing operational risks. Infrequent operational risks in commercial banks can hugely impact banks. Considering of impacts and possibility of operational risks occurrence it is therefore inevitable to be considered. In-depth understanding and past loss event data or experience can easily foster financial institutions to mitigate and manage the risk. These have resulted from the financial institution in most cases to make some provision for expected losses, impliedly setting aside capital to cover unexpected losses. Weakness in internal controls to most of the commercial banks has resulted in massive operational losses. Operational risk is said to be substantiated by banks by considering cognisance of qualitative and quantitative factors of operational risk management as the Basel committee on banking supervision are advising ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1016/S0031-9422(02)00552-6,ISBN9789291319930,ISSN00319422,abstractAbstract of Sound Practices for the Management and Supervision of Operational Risk – consultative document, December 2010,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,container-titleSound Practices for the Management and Supervision of Operational Risk Management,idITEM-1,issueFebruary,issueddate-parts2003,page245,titleSound Practices for the Management and Supervision of Operational Risk Management,typearticle-journal,volume62,urishttp//www.mendeley.com/documents/uuid99853afa-2004-444f-b8fa-8902a99abe36,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2003),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2003),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2003),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2003) The researcher after working for a number of years with Azania Bank Limited decided to do thorough research on the issues which are causing operational risks in most commercial banks. Azania Bank Limited is a fully-fledged commercial bank operating in Tanzania environment. The factors which are predominant to operational risk from one commercial bank is impliedly will cut across in the entire sector. Thus, Azania Bank Ltd will be taken as a case study to represent the entire industry of commercial bank. The issue of operational risk has drawn considerable attention to academicians, practitioners, and intellectuals over the past few years. In order to protect customers deposits, safeguarding shareholders interests, the financial institution through central bank has been forced to institute internal controls in order to manage the risk ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). Tanzanian commercial banks to survival and remain vibrant in the market in this recent era it needs a vibrant capital with minimal losses so that its image and trust to the public is not ruined/tarnished. HISTORICAL BACKGROUND OF COMMERCIAL BANKS IN TANZANIA Tanzania financial sector had been liberated by commercial banks, whereby the sector accounts for around 96 per cent of total assets of the financial sector. As to date August 2018, there are 38 licensed commercial banks in Tanzania ADDIN CSL_CITATION citationItemsidITEM-1,itemDataURLhttps//www.bot.go.tz/BankingSupervision/Directory of Banks and Financial institutions operating in Tanzania _June 2017.pdf,authordropping-particle,familyBOT Banking Operation,givenBOT,non-dropping-particle,parse-namesfalse,suffix,container-titleBankingSupervision,idITEM-1,issueddate-parts2018,titleLicensed Banks,typewebpage,urishttp//www.mendeley.com/documents/uuid17d95e27-0eb5-40c2-9e3f-bb63903cc282,http//www.mendeley.com/documents/uuid5299e960-9ac1-44d1-b2da-a2e808a1189a,mendeleyformattedCitation(BOT Banking Operation, 2018),plainTextFormattedCitation(BOT Banking Operation, 2018),previouslyFormattedCitation(BOT Banking Operation, 2018),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Operation, 2018). Colonist introduced banking sector in Tanzania, the sector was extremely with fewer commercial banks (less than three commercial banks) all owned by the Government. In 1967 after the Arusha declaration the foreign banks were nationalized, all the government merged all banks into one bank which was called the National bank of Commerce (NBC). The Tanzanian state kept dominating the banks up to 1991 where there was a high level of monopoly. After 1991 Tanzania liberalized the financial sector to enhance free market operations and improve the provision of financial services for accelerating economic growth. This is the time when most of the banks were established to operate as private institutions example Azania bank was established in 1995, NBC Limited was formed on 1st April 2000 and NMB was established in 1997. Private Banks in Tanzania was allowed to enter the market in the 1990s following liberalisation of financial sectors in Tanzania. WHY OPERATIONAL RISK IN THE FINANCIAL SECTOR. The previously operational risk was not given main concern. Previously financial sector concentrated much on credit risk, and market risks, however, due to massive losses which originated from US mortgage market in early 2000 ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1007/978-1-137-44217-8,ISBN9781137442178,authordropping-particle,familyRobertson,givenDouglas,non-dropping-particle,parse-namesfalse,suffix,container-titleManaging Operational Risk Practical Strategies to Identify and Mitigate Operational Risk within Financial Institutions,idITEM-1,issueddate-parts2016,page1-190,titleManaging Operational Risk, Practical Strategies to Identify and Mitigate Operational Risk within Financial Institutions,typearticle-journal,urishttp//www.mendeley.com/documents/uuid3e19b01e-e22c-4c2d-89b2-0dfe4bbdeea1,mendeleyformattedCitation(Robertson, 2016),plainTextFormattedCitation(Robertson, 2016),previouslyFormattedCitation(Robertson, 2016),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Robertson, 2016) hence necessitated introduction of operational risk in the commercial banks. The introduction of the risk was based on its features, and how difficult it is to identify. However, it has been concluded that the operational risks in financial sector has the followings features Diverse in its scope Operational risk in commercial banks can take or originate from any other risk category. The reasons behind are that operational risk has been embedded on people, system, processes, or external events. This forced financial regulators to consider operational risk as one of the catastrophic risks in financial institutions. Intricacy Operational risk in the real sense is complex on symptoms, sources and even its causes. In order to deal well with operational risk, one needs to understand and establish what the likely causes of operational risk are. Practitioners of operational risk in commercial banks were just guessing the causes of operational risk. Most important here is to understand what are the root causes of risk rather than making guess. No risk trade-off In operational risk, there is no way that you can gamble when the issue of investment comes across. Thus, the even minor event can cause a substantial amount of losses or catastrophic impact. Azania Bank staff essentially was not interested in taking precautions on service delivery to customers. Operational risk is immeasurable Practitioners and scholars are struggling to establish how operational risks can be quantified. The operational risk there is no means that it can be assumed in advance. With other risks, there are limits or threshold exposure set. It is possible to mitigate operational risks in commercial banks in Tanzania, but preventing it from happening is practically impossible. Non-transactional The happening of operational risks doesnt actually be influenced by the existence of transactions or being executed into systems. Operational risk can happen in any form and can hugely disrupt or affect the business. Operational risk can happen in any form of natural disaster, burglary, fire, and theft. Variety skills are required In order to understand and deal effectively with operational risks, combined skills are inevitable. The combined skills will definitely shape commercial banks in identifying what are merely the root causes, what internal processes controls should be set to control them. STATEMENT OF THE PROBLEM Severe system failures, inadequate internal process, human failure in commercial banks has become an integral part of the banking business. In one hand or another has caused banks to operate in an environment which is stiff in competition, increasing on customers expectations of excellent service delivery, technological advancement, and at the same time increase in regulatory requirements. This has forced banking industry to be more competitive and hence stand a chance to recruit some risks while running their business, this has generated a concern on managing the operational activities so as to avert from any likely risk that may occur. Basel Committee on Banking Supervision when introducing Basel II in 2003, mandated financial sector to focus on operational risk by forcing the financial institutions to identify, measure, evaluate, control, and manage the known animal operational risk ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1016/S0031-9422(02)00552-6,ISBN9789291319930,ISSN00319422,abstractAbstract of Sound Practices for the Management and Supervision of Operational Risk – consultative document, December 2010,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,container-titleSound Practices for the Management and Supervision of Operational Risk Management,idITEM-1,issueFebruary,issueddate-parts2003,page245,titleSound Practices for the Management and Supervision of Operational Risk Management,typearticle-journal,volume62,urishttp//www.mendeley.com/documents/uuid99853afa-2004-444f-b8fa-8902a99abe36,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2003),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2003),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2003),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2003). The same process of managing operational risks were adopted by Central bank of Tanzania and in 2008 issued the first regulation and guidelines on risk management. The guideline was riverside and in 2010 was issued to be used by all financial institution sector on how deal with risk management ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). The rise of bank losses, inadequate process, the ineffectiveness of existing controls is described as a life-threatening in the banking industry. These had led to the downfall of some financial institution, while on the other side the directors and regulators awareness of this risk is somehow inefficient. Despite the mandate issued by Basel II, there emerged various organisations and institutes to foster operational risks. For instance, in UK the Institute of Operational risk was formed which is now operating worldwide, which had led to an increased emphasis on the soundness of operational risk management ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyInstitute of Operational Risk,givenIOR,non-dropping-particle,parse-namesfalse,suffix,idITEM-1,issueFebruary,issueddate-parts2016,titleEmbedding an Operational Risk Management Framework,typearticle-journal,urishttp//www.mendeley.com/documents/uuiddf66414c-d662-42fc-86c0-713408e88b1c,mendeleyformattedCitation(Institute of Operational Risk, 2016),manualFormatting(Institute of Operational Risk, 2016),plainTextFormattedCitation(Institute of Operational Risk, 2016),previouslyFormattedCitation(Institute of Operational Risk, 2016),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Institute of Operational Risk, 2016). Hence operational risk is becoming the most complex, and fast-growing risk discipline in banks and financial institutions ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyThirlwell,givenJohn,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyBlunden,givenTony,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2013,number-of-pages354,publisherPearson Education, Inc.,publisher-placeHarlow CM20 JE, UK,titleMastering Operational Risk, A Practical guide to understanding operational risk and how to manage it.,typebook,urishttp//www.mendeley.com/documents/uuid70d54cc5-f4e4-404d-a30b-a5c75dfbab04,mendeleyformattedCitation(Thirlwell Blunden, 2013),plainTextFormattedCitation(Thirlwell Blunden, 2013),previouslyFormattedCitation(Thirlwell Blunden, 2013),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Thirlwell Blunden, 2013). On the other hand, when looking at what had been transpired in the global financial system, it is evidencing that banking industry is crucial to any economy, in such a way that any instability in the industry will have a great impact on the respective country economy. In order to safeguard the sector, fair and strong business practices which have no complacencies will make the sector be more stable. Non-compliance with regulations by a single bank can cause a systematic risk and corrupt the entire banking industry ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). No doubt that consistency and effective operational risk management framework will help banks achieve their goals. A call is made to the banking industry in Tanzania that, instead of fulfilling the regulatory requirement, there is a great need to oversee operational risk management from both angles. A well-defined operational risk charter will reduce or minimise losses to commercial banks and financial institutions henceforth provide efficient and reliable services. In todays business, turnaround time on service delivery is crucial. Despite the facts that Azania Bank Limited has well defined operational risk charter, there are signs that the risk is not known to staff and could cause a severe impact. System downtime, fraud and forgeries, misconducts, losses, customer complaints, and incomplete or insufficient documentation in banking processes are now common to the bank. In the light of the above, this study aimed at assessing the factor affecting operational in commercial banks in Tanzania. RESEARCH OBJECTIVE Since the study is focusing on the factors that are affecting operational risks in commercial banks in Tanzania, the objectives have been divided into two parts as follows General objective The general objective of the study is to assess the factors affecting operational risk in commercial banks in Tanzania. Specific objective The followings are specific objectives of the study To assess the factors that cause operational risk losses. To identify the operational risk exposures at Azania Bank Ltd To assess how effective operational risk management is being implemented by ABL. To assess employee awareness of procedures, regulations relates to Operational Risk. RESEARCH QUESTIONS Addressing well a research problem, and objectives, research questions need to be well-formed. Under this section, the researcher will dwell much on specific questions of operational risks. Specific questions What are the factors that most influence operational risks at ABL What are the main operational risks exposed to ABL Is the ABL effectively operate to manage operational risk Are the bank employees aware of the regulations, procedures that govern operational risk management Relevance or Importance of the study Since the study aimed at examines the factors affecting operational risks in commercial banks in Tanzania, case studies of Azania Bank Ltd. This calls for banks to effectively manage operational risks and hence minimise the effects to reduce losses. The study tries to provide guidance on how the stakeholders will be benefited by utilising the findings to self-adjust from operational risks. On the other hand, the results obtained will guide commercial banks on operational risks management practices and courses of actions needed to be taken to effectively utilise operational risk management policies, procedures, and strategies to minimise risks. It also believed that the study will provide a guide for further studies on operational risk management in other commercial banks, regulators, and academicians. The study will further have a positive contribution to a number on building knowledge on the methods used to manage operational risks, providing suggestions on the improvement of monitoring operational risks, and how operational risks need to be controlled. Other stakeholders including management of Azania Bank Ltd, and employees will benefit from the undertaken study. Apart from analysing the factors that affect operational risks, the study will also identify areas for further analysis or research under operational risks management. As part of improvement, the study will give suggestions on what should be done in order to reduce and mitigate operational risk at Azania Bank Limited and the banking sector industry as well. That is to say, the study is comprised of theoretical, empirical, and managerial significance. This is a prospect for Azania Bank Ltd as the study will help manage the risk, reduce losses, improve service delivery, managed customer complaints, and reputation wont be questioned. Scope of the study Coverage of study will be based in Dar Es Salaam region. Having 5 branches in Dar Es Salaam, this suggests that, the region is the busiest business centre in Tanzania. Generally, Azania Bank Limited has a total of 17 branches countrywide. Thus, five branches will be surveyed as well as head office. This will comprise Masdo branch, Kariakoo branch, Mawasiliano Agency, Mwenge branch, and Tegeta branch. Limitation of the study The confidentiality of obtaining operational risk information in commercial banks is high due to code of secrecy signed by banks employees, which makes them hesitate to give more information. In overcoming this shortfall, the researcher had promised by signing the promise to be strict confidentiality of the information that will be provided. The informations had been collected from questionnaires and interviews which were completed under strict concealment. The researcher also faced a challenge on quantifying operational risk findings due to time constraints. Delimitation of the study The research has been conducted at Azania Bank Limited within Dar Es Salaam region, for that case, it will not take much time due to the area of concentration of five branches. Organization of the Study This section describes the content of the study and its sections. Under chapter one, it provides an overview of operational risk management in commercial banks in Tanzania by focusing mostly to Azania Bank Limited. Chapter two gives a detailed literature review relating to risks management and operational risk management in the financial institutions as they do cuts across in the financial sector. Methodologies and its framework have been discussed in chapter three. The chapter further discussed the types and sources of data, sampling techniques, size and procedures for collection and analysis of data. It has further given the profile of the selected bank branches that has represent the Azania Bank Limited. Analysis of data and discussion has been done in chapter four. The last chapter which is chapter five gives or represents the summary of the findings of the study and tries to draw some conclusions. Specific objectives of the research had been thoroughly answered in this section at the same time making some recommendations basing on the findings. CHAPTER TWO LITERATURE REVIEW Overview The chapter represents a study and key concepts which had been used throughout the work. Understanding operational risk within the bank, a literature review is inevitable. Thus, the chapter had reviewed the existing literature, provided an overview of operational risk in commercial banks, and showed how other researchers have said about the study of factors affecting operational risk in commercial banks. The study has added up some competitive advantages to business especially commercial banks in Tanzania. The study had covered areas in relation to concepts of operational risk, financial risk management, operational risk management, and effects of operational risk management, Categories of operational risk, operational risk framework (governance), and operational risk causes in commercial banks. Definition of basic terms used had also been done. Furthermore, various theories used in operational risk has been discussed in this chapter. This include various sources of material used will include books, published journals, regulators reports, and company reports. Definition of key terms Risk Risk has been defined by various scholars to mean deviation from expectations. According to ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1016/B978-0-12-401666-8.00011-X,ISBN9780124016668,PMID12141629,authordropping-particle,familyCrouhy,givenMichel,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyGalai,givenDan,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyMark,givenRobert,non-dropping-particle,parse-namesfalse,suffix,container-titleEffective Utilisation of Enterprise Risk Management,edition2nd,idITEM-1,issueddate-parts2014,number-of-pages669,publisherMcGraw-Hill Education,publisher-placeNew York,titleThe Essential of Risk Management, Effectively implement an Enterprise Risk Management,typebook,urishttp//www.mendeley.com/documents/uuid336f7260-ce73-304c-b9d7-512a2682fed1,mendeleyformattedCitation(Crouhy, Galai, Mark, 2014),plainTextFormattedCitation(Crouhy, Galai, Mark, 2014),previouslyFormattedCitation(Crouhy, Galai, Mark, 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Crouhy, Galai, Mark, 2014) had defined risk as the unpredictability of returns leading to unexpected losses. However, to be much precise and accurate, the risk is said to be a deviation or variation of actual outcomes from the expected one. The deviation can take any form either a positive deviation or negative deviation. Deviation implies that risk can be unstated as an unintended or unexpected outcome or course of action. Expected losses are those losses that will certainly occur and reservations are made, and unexpected losses mainly are associated with unforeseen events ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyThirlwell,givenJohn,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyBlunden,givenTony,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2013,number-of-pages354,publisherPearson Education, Inc.,publisher-placeHarlow CM20 JE, UK,titleMastering Operational Risk, A Practical guide to understanding operational risk and how to manage it.,typebook,urishttp//www.mendeley.com/documents/uuid70d54cc5-f4e4-404d-a30b-a5c75dfbab04,mendeleyformattedCitation(Thirlwell Blunden, 2013),plainTextFormattedCitation(Thirlwell Blunden, 2013),previouslyFormattedCitation(Thirlwell Blunden, 2013),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Thirlwell Blunden, 2013). With unexpected losses, capital will be charged off as an absorber or buffer on such losses. Risk management Risk management is a discipline which deals with identification, measurement, control, and monitoring of risks in order to optimise risk-reward trade-off ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). Management of risk doesnt isolate categories of risk, instead, all six types of risk as per BOT guidelines are managed together ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). Risk management is vital to commercial banks since they are operating in the riskier environment. Thus, the core business of commercial banks is surrounded by risk all the time. Players of Commercial banks need on every now and then identify key risk, consistently understand risks, measure various risks, and finally selecting the best solution for monitoring the identified risks. Best Practices point out that, an effective risk management framework is vested by the board of directors. Thus, the board of directors, senior managers, and staff should be in line on risk management ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). In doing this, Board of Directors is responsible for setting risk exposures limits as a monitoring tool. Market risk In doing business, there is a possibility of investors to incur losses basing on markets factors. Market risk is a risk of losses due to adverse changes in currency exchange rates, changes in market interest rates, and changes of price in commodity and equity ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1016/B978-0-12-401666-8.00011-X,ISBN9780124016668,PMID12141629,authordropping-particle,familyCrouhy,givenMichel,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyGalai,givenDan,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyMark,givenRobert,non-dropping-particle,parse-namesfalse,suffix,container-titleEffective Utilisation of Enterprise Risk Management,edition2nd,idITEM-1,issueddate-parts2014,number-of-pages669,publisherMcGraw-Hill Education,publisher-placeNew York,titleThe Essential of Risk Management, Effectively implement an Enterprise Risk Management,typebook,urishttp//www.mendeley.com/documents/uuid336f7260-ce73-304c-b9d7-512a2682fed1,mendeleyformattedCitation(Crouhy et al., 2014),plainTextFormattedCitation(Crouhy et al., 2014),previouslyFormattedCitation(Crouhy et al., 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Crouhy et al., 2014). Losses can affect in and off-balance sheet positions as well due to adverse in market prices ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). Credit risk The quality of commercial banks assets can cause severe harm. Credit risk is a risk of losses following changes in factors that drive credit quality of an asset. These will include adverse effects arising from credit grading, defaults, and dynamics of recovery rates ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1016/B978-0-12-401666-8.00011-X,ISBN9780124016668,PMID12141629,authordropping-particle,familyCrouhy,givenMichel,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyGalai,givenDan,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyMark,givenRobert,non-dropping-particle,parse-namesfalse,suffix,container-titleEffective Utilisation of Enterprise Risk Management,edition2nd,idITEM-1,issueddate-parts2014,number-of-pages669,publisherMcGraw-Hill Education,publisher-placeNew York,titleThe Essential of Risk Management, Effectively implement an Enterprise Risk Management,typebook,urishttp//www.mendeley.com/documents/uuid336f7260-ce73-304c-b9d7-512a2682fed1,mendeleyformattedCitation(Crouhy et al., 2014),plainTextFormattedCitation(Crouhy et al., 2014),previouslyFormattedCitation(Crouhy et al., 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Crouhy et al., 2014). Credit risk has been related to the possibility that an obligor capacity to perform his/her obligation has been impaired willingly or unwillingly ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). Liquidity risk This risk refers to the possibility for loss to an institution arising from either its inability to meet its obligations as they fall due or to fund increases in assets without incurring unacceptable cost or losses ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). This includes the inability to manage both planned and unplanned funds and its funding sources. Managed funds are those in relation to the liquidation of banks assets. It means that commercial banks assets have stemmed due to the absence of the market or the market is not ready to acquire those assets. Reputation Risk Reputation risk is all about banks negative publicity on business practices leads to a loss of revenue or litigation. Basel II during its enhancement framework defined reputational risk is arising from negative perception on the part of customers, counterparties, shareholders, investors, and other relevant parties ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9291317810,abstractBasel 2.5 — The Committee in 2009 introduced enhancements to the securitisation framework. These, revisions, which were part of the Basel 2.5 reforms, addressed immediate concerns around the relative risk weights of securitisations and resecuritisations.,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,container-titleEnhancements to the Basel II Framework,idITEM-1,issueJuly,issueddate-parts2009,page1-41,titleEnhancements to the Basel II Framework,typearticle-journal,urishttp//www.mendeley.com/documents/uuid5edcc4d7-0320-4ef6-9e03-dfe19bd7f036,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2009),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2009),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2009),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2009). The risk can adversely affect a banks ability to maintain existing, or establish new, business relationships and continued access to sources of funding. Operational risk This is the main theme of the study. Operational risk is a risk which can occur internally or externally. This is the widest risk which affects mostly financial institutions worldwide. Operational risk is risk arising from people, process, systems, and external events. It refers to financial loss resulting from potential operational breakdowns. Is a loss resulting from inadequate or failed internal process, people, systems, or from external events ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1016/B978-0-12-401666-8.00011-X,ISBN9780124016668,PMID12141629,authordropping-particle,familyCrouhy,givenMichel,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyGalai,givenDan,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyMark,givenRobert,non-dropping-particle,parse-namesfalse,suffix,container-titleEffective Utilisation of Enterprise Risk Management,edition2nd,idITEM-1,issueddate-parts2014,number-of-pages669,publisherMcGraw-Hill Education,publisher-placeNew York,titleThe Essential of Risk Management, Effectively implement an Enterprise Risk Management,typebook,urishttp//www.mendeley.com/documents/uuid336f7260-ce73-304c-b9d7-512a2682fed1,mendeleyformattedCitation(Crouhy et al., 2014),plainTextFormattedCitation(Crouhy et al., 2014),previouslyFormattedCitation(Crouhy et al., 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Crouhy et al., 2014), ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1001/archsurg.136.9.1000,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,container-titleWorking Paper on the Regulatory Treatment of Operational Risk,idITEM-1,issue9,issueddate-parts2001,page30,titleWorking Paper on the Regulatory Treatment of Operational Risk,typearticle-journal,volume136,urishttp//www.mendeley.com/documents/uuidd4de7abf-ee73-435e-a26d-5623c8ad0f73,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2001c),manualFormatting(Basel Committee on Banking Supervision, 2001),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2001c),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2001c),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2001). Operational risk is said to include other risks like legal risk, reputational risk, and trading risks ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyThirlwell,givenJohn,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyBlunden,givenTony,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2013,number-of-pages354,publisherPearson Education, Inc.,publisher-placeHarlow CM20 JE, UK,titleMastering Operational Risk, A Practical guide to understanding operational risk and how to manage it.,typebook,urishttp//www.mendeley.com/documents/uuid70d54cc5-f4e4-404d-a30b-a5c75dfbab04,mendeleyformattedCitation(Thirlwell Blunden, 2013),plainTextFormattedCitation(Thirlwell Blunden, 2013),previouslyFormattedCitation(Thirlwell Blunden, 2013),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Thirlwell Blunden, 2013). Concepts of risk management Risk management deals with identification, assessment, monitoring, and reporting of the identified risks ADDIN CSL_CITATION citationItemsidITEM-1,itemDataabstractTraining material,authordropping-particle,familyProkopenko,givenYevgen,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyBondarenko,givenDenis,non-dropping-particle,parse-namesfalse,suffix,container-titleIFC International Finance Corporate,idITEM-1,issueSep,issueddate-parts2012,titleOperational Risk Management Best Practice Overview and Implementation Risk,typearticle-journal,urishttp//www.mendeley.com/documents/uuidf36f686b-c394-4ebf-a3cb-b9fe5b624207,mendeleyformattedCitation(Prokopenko Bondarenko, 2012),plainTextFormattedCitation(Prokopenko Bondarenko, 2012),previouslyFormattedCitation(Prokopenko Bondarenko, 2012),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Prokopenko Bondarenko, 2012). Thus, with risk management owners need to identify their key risks, understanding them, and choosing the best method to mitigate, or transfer the risks. This will enable the owners to institute procedures, set internal limits, and institute controls or appetite to be aligned with ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyInstitute of Operational Risk,givenIOR,non-dropping-particle,parse-namesfalse,suffix,idITEM-1,issueFebruary,issueddate-parts2016,titleEmbedding an Operational Risk Management Framework,typearticle-journal,urishttp//www.mendeley.com/documents/uuiddf66414c-d662-42fc-86c0-713408e88b1c,mendeleyformattedCitation(Institute of Operational Risk, 2016),manualFormatting(Institute of Operational Risk, 2016),plainTextFormattedCitation(Institute of Operational Risk, 2016),previouslyFormattedCitation(Institute of Operational Risk, 2016),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Institute of Operational Risk, 2016). Operational Risk Management in commercial banks Operational risk management in commercial banks had gained popularity in the recent years following financial scandals, frauds and information technology system failures. Commercial banks being exposed to different kinds of operational risk is now a common phenomenon as are exposed to both internal and external risks ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyNeary,givenBrian,non-dropping-particle,parse-namesfalse,suffix,idITEM-1,issueddate-parts2014,titleOperational Risk, what is it and how can you manage it,typearticle-journal,urishttp//www.mendeley.com/documents/uuid84d3aff9-1c25-4615-ae97-883fb8c452ec,mendeleyformattedCitation(Neary, 2014),plainTextFormattedCitation(Neary, 2014),previouslyFormattedCitation(Neary, 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Neary, 2014). The recent trend of dependence on technology, more intense competition and globalization have left the commercial banks more exposed to operational risk than ever before. On the other hand, commercial banks ability on assessing, controlling, and mitigating from operational risk is somehow a challenge ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010), thats why the central bank of Tanzania issued a guideline on risk management to financial institution players in Tanzania. Operational Risk Management Initiatives in Tanzania It has been urged that commercial banks in Tanzania to make profit risk management should be embraced that is to say Risk management should not left aside ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyM.M. Chijoriga,given,non-dropping-particle,parse-namesfalse,suffix,container-titleThe Case of Tanzania,idITEM-1,issueddate-parts1997,titleApplication of Credit Scoring and Financial Distress Prediction Models to Commercial Banks Lending, the Case of Tanzania,typearticle-journal,urishttp//www.mendeley.com/documents/uuid2c0033b4-4181-4b7a-b585-b2324aba2e88,mendeleyformattedCitation(M.M. Chijoriga, 1997),plainTextFormattedCitation(M.M. Chijoriga, 1997),previouslyFormattedCitation(M.M. Chijoriga, 1997),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(M.M. Chijoriga, 1997). Though the article targeted much on credit risk, however, inadequate and failure on internal process, people, system amounts to operational risks. The errors and omissions made on credit evaluation and monitoring amounts to operational risks. Empirical evidence suggests that an effective operational risk management framework will definitely protect customers deposit, protect public interest and shareholders value ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). The main aim of operational risk management in commercial banks is to protect shareholder value, internal awareness of operational risk, protection of reputation, and lower levels of operational losses. All these can only be well done and implemented if there is an effective operational risk management framework within commercial banks. Operational Risk Management framework Accordingly, central bank of Tanzania in the guideline of risk management issued a framework on operational risk management ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). The approach to operational risk management is more proactive and is representative for best practice. This requires bank to facilitate the timely identification and communication of risk, ensuring resources investment is sufficient to support objective for implementing operational risk management, and building risk culture within the industry ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyInstitute of Operational Risk,givenIOR,non-dropping-particle,parse-namesfalse,suffix,idITEM-1,issueFebruary,issueddate-parts2016,titleEmbedding an Operational Risk Management Framework,typearticle-journal,urishttp//www.mendeley.com/documents/uuiddf66414c-d662-42fc-86c0-713408e88b1c,mendeleyformattedCitation(Institute of Operational Risk, 2016),manualFormatting(Institute of Operational Risk, 2016),plainTextFormattedCitation(Institute of Operational Risk, 2016),previouslyFormattedCitation(Institute of Operational Risk, 2016),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Institute of Operational Risk, 2016). Azania Bank Limited had committed significant funding for the establishment of operational risk management systems, which is dealing with identification, assessment, measurement, monitoring, and controlling or manage risk exposures ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyThirlwell,givenJohn,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyBlunden,givenTony,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2013,number-of-pages354,publisherPearson Education, Inc.,publisher-placeHarlow CM20 JE, UK,titleMastering Operational Risk, A Practical guide to understanding operational risk and how to manage it.,typebook,urishttp//www.mendeley.com/documents/uuid70d54cc5-f4e4-404d-a30b-a5c75dfbab04,mendeleyformattedCitation(Thirlwell Blunden, 2013),plainTextFormattedCitation(Thirlwell Blunden, 2013),previouslyFormattedCitation(Thirlwell Blunden, 2013),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Thirlwell Blunden, 2013). Thus, the operational risk management process forces ABL management to identify and fully understand the nature of risk associated with banking activities, management are able to measure each risk. Also, the framework is forcing the management to continuous monitoring of risks to ensure that they remain at an acceptable level, and taking appropriate action to control the risks. The above narrations are about the operational risk management system, which requires a stable infrastructure with appropriate staffing in operational risk management, who knows the risk exposure to bank. The board of directors is the one which will lay out the guidelines for operational risk management function, set policies, procedures, and guidelines to be followed by management ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1504/IJISM.2007.013372,ISSN14775360,authordropping-particle,familyCOSO,givenThe Committee of Sponsoring Organizations of the Treadway Commission,non-dropping-particle,parse-namesfalse,suffix,container-titleRisk Management,idITEM-1,issueSeptember,issueddate-parts2004,page1-246,titleEnterprise Risk Management Integrated Framework,typearticle-journal,urishttp//www.mendeley.com/documents/uuid06fa5c4c-9cf1-4837-9473-7b9c98b7cfd9,mendeleyformattedCitation(COSO, 2004),plainTextFormattedCitation(COSO, 2004),previouslyFormattedCitation(COSO, 2004),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(COSO, 2004). By doing this, it is ultimately that the board is charging operational risk management responsibility to be carried out by an independent unit. Upon this succession, the operational risk management unit need to report directly to senior management. Thus, the board of directors is ultimately responsible for ensuring that banks carry out strategies and policies consistent with sound operational risk management practices according to Basel ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9291316709,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,container-titleBIS Dec 2001,idITEM-1,issueDecember,issueddate-parts2001,titleSound Practices for the Management and Supervision of Operational Risk Management,typearticle-journal,volume2,urishttp//www.mendeley.com/documents/uuid07bac708-55f0-4b60-a022-29c6dad73970,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2001b),manualFormatting(Basel Committee on Banking Supervision, 2001),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2001b),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2001b),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2001) Azania Bank operational risk management framework In response and compliance to Bank of Tanzania, Azania bank had adopted the operational risk management framework. The framework has provided a structure of implementing and embedding operational risk management within Azania Bank Limited. In high-level view, ABL has main three operational risk framework sometimes referred as three lines of defence. According to ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyThirlwell,givenJohn,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyBlunden,givenTony,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2013,number-of-pages354,publisherPearson Education, Inc.,publisher-placeHarlow CM20 JE, UK,titleMastering Operational Risk, A Practical guide to understanding operational risk and how to manage it.,typebook,urishttp//www.mendeley.com/documents/uuid70d54cc5-f4e4-404d-a30b-a5c75dfbab04,mendeleyformattedCitation(Thirlwell Blunden, 2013),plainTextFormattedCitation(Thirlwell Blunden, 2013),previouslyFormattedCitation(Thirlwell Blunden, 2013),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Thirlwell Blunden, 2013), the three lines of defence are business line management, Risk management, and Independent assurance. The first line of defence (Business line) is responsible for establishing appropriate risk and control environment, establishing and maintaining strong risk culture, putting in place adequate control. The second line of defence is responsible for oversight of business process and risk while monitoring proper implementation of risk management policies and risk management framework in the organisation. The last line of defence its main principle function is to provide independent assurance to the board and senior management on the quality and effectiveness of internal controls, risk management, and governance system and controls. With ABL, the framework consists of Board committee on Risk Management and compliance which is working under the ABL board of directors with main function including discussing with senior management the position of the bank on operational risk management and other risks, provide an oversight as needed. Also, the board committee are ensuring that it is apprised of the most significant risks, along with management recommendations in ensuring effective operational risk management and report the same to Banks Board of Directors. The second governance of Azania Bank Ltd is the Banks Senior manager positions working as Executive Committee. The committee comprises of departmental directors and key functional staff like senior managers. The committee is working under the Managing Director their main function is to assess the banks risk management capabilities, discussing an assessment of banks risk management capabilities and effectiveness. Moreover, the committee are closely working on the deliberations raised by the board committee and having a broader and more in-depth evaluation of operational risk. The third operational risk framework comprise of operational risk committee, which comprises of business line managers and senior officers. The committee their primary functions include considering on how the bank possibility to be exposed to operational risk and discuss with EXCO on the ideas for strengthening operational risk management. The framework extends to business lines officers and managers. These are responsible with daily operational risk management. Their primary functions include management of daily operational risk and other risk-prone to banking industry. In line of the above, the bank has an independent department solely dealing with risk management and compliance. The director of risk management and compliance is dedicated to monitor all the six risks as per BOT guidelines, however, much effort is placed on operational risk management as the directorate had dedicated one senior officer to deal with only operational risk management on day to day basis. Risk Identification and assessment During risk management process, identification of risk is one of the most important management functions. Identification of risk is the primary function of risk management function as it entails the identification of existing risk and possible risk that will arise from existing and new business ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyThirlwell,givenJohn,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyBlunden,givenTony,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2013,number-of-pages354,publisherPearson Education, Inc.,publisher-placeHarlow CM20 JE, UK,titleMastering Operational Risk, A Practical guide to understanding operational risk and how to manage it.,typebook,urishttp//www.mendeley.com/documents/uuid70d54cc5-f4e4-404d-a30b-a5c75dfbab04,mendeleyformattedCitation(Thirlwell Blunden, 2013),plainTextFormattedCitation(Thirlwell Blunden, 2013),previouslyFormattedCitation(Thirlwell Blunden, 2013),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Thirlwell Blunden, 2013). Identification of risk in an organization is a continuous process be it either in daily operations or business dealings. On the other hand, once the risk had been identified will need to be analyzed to determine the magnitude of exposure in the organization. That is to say, assessment of risk management is the process of identifying the different risk involved and determining the magnitude of exposure. According to ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyThirlwell,givenJohn,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyBlunden,givenTony,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2013,number-of-pages354,publisherPearson Education, Inc.,publisher-placeHarlow CM20 JE, UK,titleMastering Operational Risk, A Practical guide to understanding operational risk and how to manage it.,typebook,urishttp//www.mendeley.com/documents/uuid70d54cc5-f4e4-404d-a30b-a5c75dfbab04,mendeleyformattedCitation(Thirlwell Blunden, 2013),plainTextFormattedCitation(Thirlwell Blunden, 2013),previouslyFormattedCitation(Thirlwell Blunden, 2013),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Thirlwell Blunden, 2013) noted that operational risk management can be identified in business through workshops, interviews, brainstorming, use of questionnaires, and using combination of brainstorming and workshop. Risk identification effectiveness needs to consider both internal and external factors that will adversely affect banks achievement of its strategic plan. Internal factors refer to complexity of organization structure, internal process, organization activities, staffing competency, and employee turnover, on the other hand, external factors refer to changes in market forces, and technological advancement ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9789291315499,abstractRevised guidelines replacing the Good Practice Principles on Supervisory Colleges published in 2010. Aims to promote and strengthen operations of colleges and reflect observations on best practice. Incorporated recent supervisory developments eg information of crisis mgmt groups (CMGs) and greater focus on macroprudential considerations.,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,container-titleBIS 2001,idITEM-1,issueJune,issueddate-parts2001,titlePrinciples for the Sound Management of Operational Risk,typearticle-journal,volume1,urishttp//www.mendeley.com/documents/uuid230d9566-7790-4edd-ba4c-61b790a4886e,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2001a),manualFormatting(Basel Committee on Banking Supervision, 2001),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2001a),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2001a),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2001). Basel committee through ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9291316709,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,container-titleBIS Dec 2001,idITEM-1,issueDecember,issueddate-parts2001,titleSound Practices for the Management and Supervision of Operational Risk Management,typearticle-journal,volume2,urishttp//www.mendeley.com/documents/uuid07bac708-55f0-4b60-a022-29c6dad73970,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2001b),manualFormatting(Basel Committee on Banking Supervision, 2001),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2001b),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2001b),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2001) pointed out that risk assessment is an important and fundamental for an effective operational risk management system, and risk assessment allows the bank to better understand its risk profile and allocate risk management resources and strategies most effectively. That is to say identification and assessment of relevant risk to achievement of the objectives, forming a basis for determining how risk should be managed. Once risks have been identified, an assessment of possible impact and corresponding likelihood of occurrence have to be done accordingly ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyThirlwell,givenJohn,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyBlunden,givenTony,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2013,number-of-pages354,publisherPearson Education, Inc.,publisher-placeHarlow CM20 JE, UK,titleMastering Operational Risk, A Practical guide to understanding operational risk and how to manage it.,typebook,urishttp//www.mendeley.com/documents/uuid70d54cc5-f4e4-404d-a30b-a5c75dfbab04,mendeleyformattedCitation(Thirlwell Blunden, 2013),plainTextFormattedCitation(Thirlwell Blunden, 2013),previouslyFormattedCitation(Thirlwell Blunden, 2013),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Thirlwell Blunden, 2013). The Bank of International Settlement through ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9789291315499,abstractRevised guidelines replacing the Good Practice Principles on Supervisory Colleges published in 2010. Aims to promote and strengthen operations of colleges and reflect observations on best practice. Incorporated recent supervisory developments eg information of crisis mgmt groups (CMGs) and greater focus on macroprudential considerations.,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,container-titleBIS 2001,idITEM-1,issueJune,issueddate-parts2001,titlePrinciples for the Sound Management of Operational Risk,typearticle-journal,volume1,urishttp//www.mendeley.com/documents/uuidda710c3c-48be-460b-add3-8e31c1c449cb,http//www.mendeley.com/documents/uuid230d9566-7790-4edd-ba4c-61b790a4886e,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2001a),manualFormatting(Basel Committee on Banking Supervision, 2001),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2001a),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2001a),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2001) mentioned out some important tools that can used to identify and assess risk are Audit Findings, Internal Loss Data Collection and Analysis, Risk Assessments, Business Process Mapping, Risk and Performance Indicators, Scenario Analysis, Measurement, Comparative Analysis, and External Data Collection and Analysis Risk Measurement This is another critical and important in risk management, as once the risk has been identified, measurement is important to determine how it will impact the bank in terms of profitability and capital ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). Assessment of risks can be done by using tools be it sophisticated or simple one. Risk measurement system should assess the risk of both individual transaction and entire portfolio as well ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). Risk Monitoring Risk management entails also the process of monitoring of operational risk by having an effective management information system to monitor the risk levels and enhancing timely review of operational risk positions. This process should be done frequently, timely, accurately, and the results be distributed to respective persons for closureADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010). Thus comparison of comparison of the actual risk levels with the levels permissible under the banks operational risk management guidelines ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyThirlwell,givenJohn,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyBlunden,givenTony,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2013,number-of-pages354,publisherPearson Education, Inc.,publisher-placeHarlow CM20 JE, UK,titleMastering Operational Risk, A Practical guide to understanding operational risk and how to manage it.,typebook,urishttp//www.mendeley.com/documents/uuid70d54cc5-f4e4-404d-a30b-a5c75dfbab04,mendeleyformattedCitation(Thirlwell Blunden, 2013),plainTextFormattedCitation(Thirlwell Blunden, 2013),previouslyFormattedCitation(Thirlwell Blunden, 2013),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Thirlwell Blunden, 2013). Continuous monitoring ensure that commercial banks remains within the acceptable range. Factors Influencing or Affecting Operational Risk This is the central theme of the study. Operational risk management is one among the various activities of the banks and is influenced by two factors namely, external and internal to the bank ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyThirlwell,givenJohn,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyBlunden,givenTony,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2013,number-of-pages354,publisherPearson Education, Inc.,publisher-placeHarlow CM20 JE, UK,titleMastering Operational Risk, A Practical guide to understanding operational risk and how to manage it.,typebook,urishttp//www.mendeley.com/documents/uuid70d54cc5-f4e4-404d-a30b-a5c75dfbab04,mendeleyformattedCitation(Thirlwell Blunden, 2013),plainTextFormattedCitation(Thirlwell Blunden, 2013),previouslyFormattedCitation(Thirlwell Blunden, 2013),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Thirlwell Blunden, 2013), and ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9291316709,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,container-titleBIS Dec 2001,idITEM-1,issueDecember,issueddate-parts2001,titleSound Practices for the Management and Supervision of Operational Risk Management,typearticle-journal,volume2,urishttp//www.mendeley.com/documents/uuid07bac708-55f0-4b60-a022-29c6dad73970,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2001b),manualFormatting(Basel Committee on Banking Supervision, 2001),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2001b),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2001b),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2001). According to ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1016/S0031-9422(02)00552-6,ISBN9789291319930,ISSN00319422,abstractAbstract of Sound Practices for the Management and Supervision of Operational Risk – consultative document, December 2010,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,container-titleSound Practices for the Management and Supervision of Operational Risk Management,idITEM-1,issueFebruary,issueddate-parts2003,page245,titleSound Practices for the Management and Supervision of Operational Risk Management,typearticle-journal,volume62,urishttp//www.mendeley.com/documents/uuid99853afa-2004-444f-b8fa-8902a99abe36,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2003),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2003),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2003),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2003) External factors to operational risk which increase chances of commercial banks to risk exposures includes unstable political environment, technological advancement, legal factors, and economic factors. On the other hand, Basel committee noted that internal factors are those factors that are within the reach and control of organization. They include internal controls and operational risk management function within the bank. These two items of internal factors are much crucial as influencing factors to operational risk. According to ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyThirlwell,givenJohn,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyBlunden,givenTony,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2013,number-of-pages354,publisherPearson Education, Inc.,publisher-placeHarlow CM20 JE, UK,titleMastering Operational Risk, A Practical guide to understanding operational risk and how to manage it.,typebook,urishttp//www.mendeley.com/documents/uuid70d54cc5-f4e4-404d-a30b-a5c75dfbab04,mendeleyformattedCitation(Thirlwell Blunden, 2013),plainTextFormattedCitation(Thirlwell Blunden, 2013),previouslyFormattedCitation(Thirlwell Blunden, 2013),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Thirlwell Blunden, 2013) components of internal controls are the internal control environment, risk assessment, internal control activities, information and communication, and monitoring. Developing Effective Operational Risk Management According to ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyThirlwell,givenJohn,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyBlunden,givenTony,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2013,number-of-pages354,publisherPearson Education, Inc.,publisher-placeHarlow CM20 JE, UK,titleMastering Operational Risk, A Practical guide to understanding operational risk and how to manage it.,typebook,urishttp//www.mendeley.com/documents/uuid70d54cc5-f4e4-404d-a30b-a5c75dfbab04,mendeleyformattedCitation(Thirlwell Blunden, 2013),plainTextFormattedCitation(Thirlwell Blunden, 2013),previouslyFormattedCitation(Thirlwell Blunden, 2013),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Thirlwell Blunden, 2013) and ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010) In developing sound practices for effective Operational Risk Management Framework, operational risk management activities need to include and consider identification of risk, assessment of risk, monitoring and control/mitigation of risk. Additionally, the Bank of International Settlement under The Basel Committee in 2001, and 2011 respectively suggested seven principles for effective Operational risk management framework to be followed by commercial banks ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9789291315499,abstractRevised guidelines replacing the Good Practice Principles on Supervisory Colleges published in 2010. Aims to promote and strengthen operations of colleges and reflect observations on best practice. Incorporated recent supervisory developments eg information of crisis mgmt groups (CMGs) and greater focus on macroprudential considerations.,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,idITEM-1,issueJune,issueddate-parts2011,titlePrinciples for the sound management of Operational Risk Management,typearticle-journal,urishttp//www.mendeley.com/documents/uuid2b7df9f9-79f8-4d84-97a0-7f07208964c4,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2011),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2011),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2011),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2011). However, in 2014 the BIS revised the principles of sound management of operational risk from seven to ten so as to increase controls on operational risk management ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9789291315499,abstractRevised guidelines replacing the Good Practice Principles on Supervisory Colleges published in 2010. Aims to promote and strengthen operations of colleges and reflect observations on best practice. Incorporated recent supervisory developments eg information of crisis mgmt groups (CMGs) and greater focus on macroprudential considerations.,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,container-titleBIS 2014,idITEM-1,issueOctober,issueddate-parts2014,titleReview of the principles for the sound management of Operational Risk,typearticle-journal,urishttp//www.mendeley.com/documents/uuidbe2e3e50-74f1-4a70-a50a-cf6958816da6,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2014),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2014),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2014). These principles highlight the responsibilities of Board of directors and senior managers on the effective control of operations risk. Theoretical literature review Several theories have been designed by different scholars in relation to explaining operational risk management in the financial sector. In turn, analysis of some operational risk management theories shall dwell in this section. Extreme value theory This is a branch of statistics dealing with extreme deviations from the median of the probability distribution ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.21314/JOP.2013.131,ISSN17446740,authordropping-particle,familyErgashev,givenBakhodir,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyMittnik,givenStefan,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familySekeris,givenEvan,non-dropping-particle,parse-namesfalse,suffix,container-titleThe Journal of Operational Risk,idITEM-1,issue4,issueddate-parts2013,page55-81,titleA Bayesian approach to extreme value estimation in operational risk modelling,typearticle-journal,volume8,urishttp//www.mendeley.com/documents/uuid6828ec1e-d074-43f1-8dee-46d17e4999a3,http//www.mendeley.com/documents/uuid6492c5a3-7aa0-47e3-a41f-fcf1c08e931a,mendeleyformattedCitation(Ergashev, Mittnik, Sekeris, 2013),plainTextFormattedCitation(Ergashev, Mittnik, Sekeris, 2013),previouslyFormattedCitation(Ergashev, Mittnik, Sekeris, 2013),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Ergashev, Mittnik, Sekeris, 2013). The same theory has been explained by ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyGourier,givenElise,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyFarkas,givenWalter,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyAbbate,givenDonato,non-dropping-particle,parse-namesfalse,suffix,container-titleOperational Risk,idITEM-1,issue3,issueddate-parts2009,page3-26,titleOperational risk quantification using extreme value theory and copulas from theory to practice,typearticle-journal,volume4,urishttp//www.mendeley.com/documents/uuidd58da9ae-e47b-4328-9ce1-1db36349c04d,http//www.mendeley.com/documents/uuidec6e5285-7f04-468b-b4f5-f37fbea18f8f,mendeleyformattedCitation(Gourier, Farkas, Abbate, 2009),plainTextFormattedCitation(Gourier, Farkas, Abbate, 2009),previouslyFormattedCitation(Gourier, Farkas, Abbate, 2009),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Gourier, Farkas, Abbate, 2009), the theory tries to assess the probability of an event which is more extreme than the previously observed from sample of random variable data. The banking sector in Tanzania is undergoing major changes which are exposed to operational losses due to the deviation, noncompliance, or failed internal process, system and people. The extremity deviation calls for the sophistication of risk management tools to identify, measure, assess, monitor, and reporting the operational risks. This means that there is a deviation or failure on internal controls and hence banks opt to transfer risks to other parties like insurance to cover for losses. Not complying with internal controls, limits, process, and external requirements and regulations are the most dominant factors which will facilitate maturity of operational risk in commercial banks. Regulation innovation theory It is recommended by scholars that, researching for financial innovation can have a connection with social regulation. Henceforth, the regulation transformation has mutual influence and causality with economic regulation ADDIN CSL_CITATION citationItemsidITEM-1,itemDataabstractArndvances in science and technology can yield significant societal benefits and rndrive economic growth. The challenge for society is to channel evidence rnabout innovative technologies and their risks to improve decision making in rnthe area of regulation and policy making. rnMy annual report sets out my response as Chief Scientific Adviser to the rnchallenges faced by decision makers when determining policy. It considers the rndifferent perspectives through which risk is viewed by members of the public, rnbusiness and policy-makers. The report also seeks to understand the bases for rnindividual and collective decisions on when and how to innovate. rn To produce my report I have drawn on the expertise of a broad range of experts rnand academics, who have set out the evidence about the challenges faced by policy rnmakers and regulators. I have also sought and included notable case studies which rnillustrate the perspectives in the core of the report. This volume comprises that rnbody of evidence and associated case studies,authordropping-particle,familyThe Government Office for Science,givenLondon,non-dropping-particle,parse-namesfalse,suffix,container-titleAnnual Report of the Government Chief Scientific Adviser 2014. Innovation Managing Risk, Not Avoiding It. The Government Office for Science, London,idITEM-1,issueddate-parts2014,page1-11,titleInnovation Managing risk, not avoiding it,typearticle-journal,urishttp//www.mendeley.com/documents/uuid6d75387f-8539-48ed-8a56-708ca7af4417,http//www.mendeley.com/documents/uuidf4f25fd3-6d3e-4949-b4f8-e1d3c1176996,mendeleyformattedCitation(The Government Office for Science, 2014),plainTextFormattedCitation(The Government Office for Science, 2014),previouslyFormattedCitation(The Government Office for Science, 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(The Government Office for Science, 2014). It is difficult to have financial innovation for the planned economy with strict control and pure free market economy, hence force any changes led by regulation reform in the financial system be considered as innovation ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyChristensen,givenTom,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyLaegreid,givenPer,non-dropping-particle,parse-namesfalse,suffix,idITEM-1,issueddate-parts2005,page1-42,titleRegulatory Reform and Agencyfication,typearticle-journal,volumeWorking Pa,urishttp//www.mendeley.com/documents/uuid0505520d-63d4-459e-abb8-ccbe862d12c4,http//www.mendeley.com/documents/uuid32016c95-30db-4bb6-ba9d-d0c3c4ed8255,mendeleyformattedCitation(Christensen Laegreid, 2005),plainTextFormattedCitation(Christensen Laegreid, 2005),previouslyFormattedCitation(Christensen Laegreid, 2005),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Christensen Laegreid, 2005). When the central bank of Tanzania intervenes, introduces new innovation for instance on payment system, commercial banks may delay either in implementing or adopting the changes. Hence creates some loopholes to system, people and stakeholders at large. Regulation innovation can be regarded as one of the concerns in operational risk management in commercial banks. This is done through rules, regulations, and circulars used in controlling the financial innovation. None complying with rules, regulations, circulars, changes, and laws is one of the factors that can lead to operational risks in commercial banks. X-Efficiency Model theory Empirical Literature Review Various studies have been carried out in regard to Operational risk management practices in different parts of the world. Studies had been done to various countries including Tanzania as follows In a survey examining operational risk management by commercial banks in Kenya, ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyMugenda,givenGaloa N.,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyMomanyi,givenGideon,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyNaibei,givenIsaac Kiprotich,non-dropping-particle,parse-namesfalse,suffix,container-titleResearch Journal of Finance and Accounting,idITEM-1,issue1,issueddate-parts2012,page14-29,titleImplications of Risk Management Practices on Financial Performance of Sugar Manufacturing Firms in Kenya,typearticle-journal,volume1,urishttp//www.mendeley.com/documents/uuidecd10dd4-5f8a-427a-ba79-b3edef041e39,mendeleyformattedCitation(Mugenda, Momanyi, Naibei, 2012),plainTextFormattedCitation(Mugenda, Momanyi, Naibei, 2012),previouslyFormattedCitation(Mugenda, Momanyi, Naibei, 2012),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Mugenda, Momanyi, Naibei, 2012), the study indicated that Kenya commercial banks had quantified risks into various categories. The researcher further indicated that, out of twenty-two commercial banks in Kenya, only sixteen banks had segregated risk into various categories, and a minority of them to quantify the risk. In additionally according to ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyMugenda,givenGaloa N.,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyMomanyi,givenGideon,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyNaibei,givenIsaac Kiprotich,non-dropping-particle,parse-namesfalse,suffix,container-titleResearch Journal of Finance and Accounting,idITEM-1,issue1,issueddate-parts2012,page14-29,titleImplications of Risk Management Practices on Financial Performance of Sugar Manufacturing Firms in Kenya,typearticle-journal,volume1,urishttp//www.mendeley.com/documents/uuidecd10dd4-5f8a-427a-ba79-b3edef041e39,mendeleyformattedCitation(Mugenda et al., 2012),plainTextFormattedCitation(Mugenda et al., 2012),previouslyFormattedCitation(Mugenda et al., 2012),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Mugenda et al., 2012), central bank of Kenya published in daily nation in 2005 that, only seventeen registered banks in Kenya had set aside funds to cover against operational risk management to serve as a buffer in an event of shocks. Likewise, only ten commercial banks out of seventeen submitted adequate and consistent risk monitoring reports. This implies that operational risk management is inadequate, and hence poses a predictability of operational risk occurrence in commercial banks at Kenya. American Journal of Finance ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyMugenda,givenGaloa N.,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyMomanyi,givenGideon,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyNaibei,givenIsaac Kiprotich,non-dropping-particle,parse-namesfalse,suffix,container-titleResearch Journal of Finance and Accounting,idITEM-1,issue1,issueddate-parts2012,page14-29,titleImplications of Risk Management Practices on Financial Performance of Sugar Manufacturing Firms in Kenya,typearticle-journal,volume1,urishttp//www.mendeley.com/documents/uuidecd10dd4-5f8a-427a-ba79-b3edef041e39,mendeleyformattedCitation(Mugenda et al., 2012),plainTextFormattedCitation(Mugenda et al., 2012),previouslyFormattedCitation(Mugenda et al., 2012),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Mugenda et al., 2012), indicates that Macha, in 2010, made a study on operational risk management in financial sectors in Tanzania, and found that, 20 financial intermediaries out of 56 financial intermediaries had insured against operational risk. Insurance serves as the buffering for operational risk losses whereby the commercial banks to transfer the risk to another player. Also, the central bank of Tanzania does insist commercial banks to protect their operational activities that fall under operational risk categories. The study further indicated that lack of integrity among staff members (termed as internal facto), and the nature of the business that the banks undertake (Externalities), are the major factors affecting operational risks in commercial banks in Tanzania. ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010) a guideline issued by the central bank of Tanzania insist on transferring operational risks through insurance so that commercial banks can operate effectively and smoothly. ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1080/14330237.2012.10874524,ISSN14330237,authordropping-particleVan,familyNiekerk,givenAnnelize,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyGeldenhuys,givenDirk J,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyLevin,givenMadia M,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyMay,givenMichelle,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyMoalusi,givenGope,non-dropping-particle,parse-namesfalse,suffix,container-titlein Journal of Psychology in Africa January 2012,idITEM-1,issue1,issueddate-parts2012,page77-86,titleImplementing an Operational Risk Management Framework Psycho-Social Factors in Tanzania,typearticle-journal,volume22,urishttp//www.mendeley.com/documents/uuid93d37549-bfe3-406d-9927-e4fabc3d1096,mendeleyformattedCitation(Niekerk, Geldenhuys, Levin, May, Moalusi, 2012),plainTextFormattedCitation(Niekerk, Geldenhuys, Levin, May, Moalusi, 2012),previouslyFormattedCitation(Niekerk, Geldenhuys, Levin, May, Moalusi, 2012),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Niekerk, Geldenhuys, Levin, May, Moalusi, 2012) made a research on operational risks which are posed to commercial banks in Tanzania, and found that prior adoption of Basel II there was no strict operational risk management policies adopted by commercial banks in Tanzania. During the implementation of Basel II as a best practice in Tanzania, there was various factors that impacted the effective implementation of an operational risk management framework. Those factors were the subordination of personal interest (internal resistance) to the company goal, and cultural aspects and the business environment ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1080/14330237.2012.10874524,ISSN14330237,authordropping-particleVan,familyNiekerk,givenAnnelize,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyGeldenhuys,givenDirk J,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyLevin,givenMadia M,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyMay,givenMichelle,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyMoalusi,givenGope,non-dropping-particle,parse-namesfalse,suffix,container-titlein Journal of Psychology in Africa January 2012,idITEM-1,issue1,issueddate-parts2012,page77-86,titleImplementing an Operational Risk Management Framework Psycho-Social Factors in Tanzania,typearticle-journal,volume22,urishttp//www.mendeley.com/documents/uuid93d37549-bfe3-406d-9927-e4fabc3d1096,mendeleyformattedCitation(Niekerk et al., 2012),plainTextFormattedCitation(Niekerk et al., 2012),previouslyFormattedCitation(Niekerk et al., 2012),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Niekerk et al., 2012) which is termed an external factor. That is to say, the resistance deployed and the environment surrounding the commercial banks in Tanzania are the main factors that might cause operational risk to crystallise in a fraction of second. ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyJohnemark,givenA,non-dropping-particle,parse-namesfalse,suffix,container-titleUnpublished Paper, Royal Institute of Technology Stockholm.,idITEM-1,issueddate-parts2012,titleModelling Operational Risk,typearticle-journal,urishttp//www.mendeley.com/documents/uuid9f13dd48-40e4-4a59-b8ee-794d7f417515,mendeleyformattedCitation(Johnemark, 2012),plainTextFormattedCitation(Johnemark, 2012),previouslyFormattedCitation(Johnemark, 2012),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Johnemark, 2012) a study on modelling operational risks in Sweden narrates that, modelling operational risk at glance seems to be very easy. However, since operational risk is wide, developing a model is very hard which needs to incorporate a large sample of data. On the other hand, having single data can easily distort the entire exercise of modelling operational risk, its impact once crystallised might be huge enough to affect the business. Conceptual framework According to ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9780073521503,abstractThe Twelfth Edition of Business Research Methods reflects a thoughtful revision of a market standard. Students and professors will find thorough, current coverage of all business research topics presented with a balance of theory and practical application. Authors Donald Cooper and Pamela Schindler use managerial decision-making as the theme of Business Research Methods and they provide the content and structure to ensure students grasp of the business research function. This textbook also encourages and supports the completion of an in-depth business research project, if desired, by the professor. Features of the Twelfth Edition include The MindWriter continuing case study has been updated to focus on online survey methodology with Appendix A including a newly redesigned MindWriter CompleteCare online survey. New and revised Snapshots and PicProfiles provide 82 timely mini-cases presented from a researchers perspective, with additional mini-cases added to the accompanying instructors manual. New and revised Closeups offer in-depth examination of key examples. All new From the Headlines discussion questions. The Cases section contains the abstract for the new case Marcus Thomas LLC Tests Hypothesis for Troy-Bilt Creative Development, and an updated case-by-chapter suggested-use chart. Some textbook content has been moved to the Online Learning Center, and includes the Multivariate Analysis chapter, and several end-of-chapter appendices. For more information, and to learn more about the teaching and study resources available to you, visit the Online Learning Center www.mhhe.com/cooper12e CourseSmart enables access to a printable e-book from any computer that has Internet service without plug-ins or special software. With CourseSmart, students can highlight text, take and organize notes, and share those notes with other CourseSmart users. Curious Go to www.coursesmart.com,authordropping-particle,familyCooper,givenDonald R.,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familySchindler,givenPamela S.,non-dropping-particle,parse-namesfalse,suffix,edition12,idITEM-1,issueddate-parts2014,number-of-pages723,publisherMcGraw-Hill Education,publisher-placeNew York, NY,titleBusiness Research Methods,typebook,urishttp//www.mendeley.com/documents/uuid0578a8ea-45f5-438a-8d8f-0304a8b9dda9,mendeleyformattedCitation(Cooper Schindler, 2014),plainTextFormattedCitation(Cooper Schindler, 2014),previouslyFormattedCitation(Cooper Schindler, 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Cooper Schindler, 2014), and ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9781292016641,authordropping-particle,familySaunders,givenMark,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyLewis,givenPhilip,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyThornhill,givenAdrian,non-dropping-particle,parse-namesfalse,suffix,edition7th,idITEM-1,issueddate-parts2015,number-of-pages729,publisherPearson Education Limited,publisher-placeHarlow CM20 JE,titleResearch Methods for Business Students,typebook,urishttp//www.mendeley.com/documents/uuid0004f026-48a6-43f0-8ef8-882db516a6f6,mendeleyformattedCitation(Saunders, Lewis, Thornhill, 2015),plainTextFormattedCitation(Saunders, Lewis, Thornhill, 2015),previouslyFormattedCitation(Saunders, Lewis, Thornhill, 2015),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Saunders, Lewis, Thornhill, 2015), a conceptual framework in research is the blueprint or foundation of any research work. These are sets of research concepts and variables with logical relationships presented either in charts, diagrams, flowcharts, or in mathematical equations. The framework shall link the research problem statement or variables in order to formulate descriptive research concepts. In this paper, the conceptual framework is based on the assumption that among the risks faced by commercial banks, operational risk is relevant among those risks. Then, looking on the factors that triggers to operational risk need. A conceptual framework for this study has been depicted in the figure below Basel committee agreed that cooperation should be applied to the management of operational risk as it is done for the management of another significant risk ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9789291315499,abstractRevised guidelines replacing the Good Practice Principles on Supervisory Colleges published in 2010. Aims to promote and strengthen operations of colleges and reflect observations on best practice. Incorporated recent supervisory developments eg information of crisis mgmt groups (CMGs) and greater focus on macroprudential considerations.,authordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,container-titleBIS 2014,idITEM-1,issueOctober,issueddate-parts2014,titleReview of the principles for the sound management of Operational Risk,typearticle-journal,urishttp//www.mendeley.com/documents/uuidbe2e3e50-74f1-4a70-a50a-cf6958816da6,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2014),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2014),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2014). Risk management framework consists of risk identification, measurement, control, and Monitoring. As it has been pointed in ADDIN CSL_CITATION citationItemsidITEM-1,itemDataDOI10.1596/0-8213-4417-X,ISBN0821377280,abstractThe third edition of Analyzing Banking Risk provides a comprehensive overview of topics dealing with the assessment, analysis, and management of financial risks in banking. The publication emphasises risk-management principles and stresses that key players in the corporate governance process are accountable for managing the different dimensions of financial risk. A significant new addition to this 3rd edition is the inclusion of chapters on the management of the treasury function. Advances made by the Basel Committee on Banking Supervision are reflected in the chapters on capital adequacy, transparency, and banking supervision. This publication should be of interest to a wide body of users of bank financial data. The target audience includes persons responsible for the analysis of banks and for the senior management or organisations directing their efforts.,authordropping-particle,familyGreuning,givenH,non-dropping-particleVan,parse-namesfalse,suffix,dropping-particle,familyBrajovic Bratanovic,givenS,non-dropping-particle,parse-namesfalse,suffix,container-titleThe International Bank for Reconstruction and Development,idITEM-1,issueddate-parts2009,number-of-pages422,titleAnalysing Banking Risk A framework for assessing corporate governance and financial risk management,typebook,urishttp//www.mendeley.com/documents/uuid4b537e03-42eb-4be8-8233-d051a4078d18,mendeleyformattedCitation(Van Greuning Brajovic Bratanovic, 2009),plainTextFormattedCitation(Van Greuning Brajovic Bratanovic, 2009),previouslyFormattedCitation(Van Greuning Brajovic Bratanovic, 2009),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Van Greuning Brajovic Bratanovic, 2009), and ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyInstitute of Operational Risk,givenIOR,non-dropping-particle,parse-namesfalse,suffix,idITEM-1,issueFebruary,issueddate-parts2016,titleEmbedding an Operational Risk Management Framework,typearticle-journal,urishttp//www.mendeley.com/documents/uuiddf66414c-d662-42fc-86c0-713408e88b1c,mendeleyformattedCitation(Institute of Operational Risk, 2016),manualFormatting(Institute of Operational Risk, 2016),plainTextFormattedCitation(Institute of Operational Risk, 2016),previouslyFormattedCitation(Institute of Operational Risk, 2016),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Institute of Operational Risk, 2016), there is no single risk management system that will fit all financial intermediaries. This requires each commercial bank to develop her own risk management guideline which will be tailored to the needs and henceforth, must be within or cover all six risks which have been categorised in guideline ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBOT Banking Supervision,givenBOT,non-dropping-particle,parse-namesfalse,suffix,edition2nd,idITEM-1,issueddate-parts2010,publisherBOT,publisher-placeDar Es Salaam,titleRisk Management Guidelines for Banks and Financial Institutions,typebook,urishttp//www.mendeley.com/documents/uuid6cc893c5-0371-3f87-9d6d-d52b7213b8b0,mendeleyformattedCitation(BOT Banking Supervision, 2010),plainTextFormattedCitation(BOT Banking Supervision, 2010),previouslyFormattedCitation(BOT Banking Supervision, 2010),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(BOT Banking Supervision, 2010) There are various causes of operational risks in commercial banks which crystallises to operational losses. However, there is no a universe agreement on the most predominant factors in banking industry due to the uniqueness of operational risks. In this study, it is hypothesised that there are mainly two factors internal factors and external factors. Internal factors accounts to lack or weakness on internal control, process and procedures, people (staff), and system. External factors accounts on all factors caused by externalities like natural disaster, fraudulent acts by other persons apart from employee, and external business environment ADDIN CSL_CITATION citationItemsidITEM-1,itemDataauthordropping-particle,familyBasel Committee on Banking Supervision,givenBIS,non-dropping-particle,parse-namesfalse,suffix,container-titleManagement,idITEM-1,issueMay 2001,issueddate-parts2002,titleOperational Risk Data Collection and Loss event type classification,typearticle-journal,urishttp//www.mendeley.com/documents/uuid5a53edb0-299b-4ac5-b168-4f8b82be0d51,http//www.mendeley.com/documents/uuiddd67824f-b8ad-48b9-9f95-c1f22032ea61,mendeleyformattedCitation(Basel Committee on Banking Supervision, 2002),plainTextFormattedCitation(Basel Committee on Banking Supervision, 2002),previouslyFormattedCitation(Basel Committee on Banking Supervision, 2002),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Basel Committee on Banking Supervision, 2002). The result will be discussed in detail in chapter 4. Summary of Literature review The study had been based on the concepts of operational risk management in commercial banks in Tanzania. From the literature review, it has been evidenced that currently, operational risk management in commercial banks is inevitable due to increases in technology, peoples knowledge, processes, and internal controls. These are the main stems or exposures of operational risks in commercial banks. Before making any decision on operational risk once events had been crystallised, a manager needs to consider more than one methodology so that the decision to be made be more realistic and sounder. Operational risk framework should be a participatory one and of two-way traffic. Board of Directors, senior managers, line managers, risk practitioners and the business line should sing a single song to enhance internal controls. Policies, procedures, internal controls, and reporting of risk are the most important element in operational risk management which will identify, monitor, measure, and mitigate operational risks. Literature gap Tanzanian financial sector is most predominantly with operational risk. The studies had been made to investigate various risks facing the sector. However, the study had precisely dealt with factors affecting operational risks in commercial banks in Tanzania, taking Azania Bank as a case study. It is obvious that other studies have not been exclusively covered due to limited sample frame. The study had only based on 5 branches from Dar Es Salaam to undertake the study. Furthermore, the literature referenced and the studies outlined in this chapter, to a great extent had not been done under the Tanzanian environment. There are also challenges in limited published studies on the subject matter, this to a great extent had limited the study and outcomes. CHAPTER THREE RESEARCH METHODOLOGY Overview The main of research work is mainly to design the research tools and techniques that effectively have captured, validated, and also measured the key characteristics in order to arrive at the goal. The chapter presents the research methodology used in the study. The methodology provides details regarding the procedures used in conducting a research study. According to ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9780073521503,abstractThe Twelfth Edition of Business Research Methods reflects a thoughtful revision of a market standard. Students and professors will find thorough, current coverage of all business research topics presented with a balance of theory and practical application. Authors Donald Cooper and Pamela Schindler use managerial decision-making as the theme of Business Research Methods and they provide the content and structure to ensure students grasp of the business research function. This textbook also encourages and supports the completion of an in-depth business research project, if desired, by the professor. Features of the Twelfth Edition include The MindWriter continuing case study has been updated to focus on online survey methodology with Appendix A including a newly redesigned MindWriter CompleteCare online survey. New and revised Snapshots and PicProfiles provide 82 timely mini-cases presented from a researchers perspective, with additional mini-cases added to the accompanying instructors manual. New and revised Closeups offer in-depth examination of key examples. All new From the Headlines discussion questions. The Cases section contains the abstract for the new case Marcus Thomas LLC Tests Hypothesis for Troy-Bilt Creative Development, and an updated case-by-chapter suggested-use chart. Some textbook content has been moved to the Online Learning Center, and includes the Multivariate Analysis chapter, and several end-of-chapter appendices. For more information, and to learn more about the teaching and study resources available to you, visit the Online Learning Center www.mhhe.com/cooper12e CourseSmart enables access to a printable e-book from any computer that has Internet service without plug-ins or special software. With CourseSmart, students can highlight text, take and organize notes, and share those notes with other CourseSmart users. Curious Go to www.coursesmart.com,authordropping-particle,familyCooper,givenDonald R.,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familySchindler,givenPamela S.,non-dropping-particle,parse-namesfalse,suffix,edition12,idITEM-1,issueddate-parts2014,number-of-pages723,publisherMcGraw-Hill Education,publisher-placeNew York, NY,titleBusiness Research Methods,typebook,urishttp//www.mendeley.com/documents/uuid0578a8ea-45f5-438a-8d8f-0304a8b9dda9,mendeleyformattedCitation(Cooper Schindler, 2014),plainTextFormattedCitation(Cooper Schindler, 2014),previouslyFormattedCitation(Cooper Schindler, 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Cooper Schindler, 2014), ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9781292016641,authordropping-particle,familySaunders,givenMark,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyLewis,givenPhilip,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyThornhill,givenAdrian,non-dropping-particle,parse-namesfalse,suffix,edition7th,idITEM-1,issueddate-parts2015,number-of-pages729,publisherPearson Education Limited,publisher-placeHarlow CM20 JE,titleResearch Methods for Business Students,typebook,urishttp//www.mendeley.com/documents/uuid0004f026-48a6-43f0-8ef8-882db516a6f6,mendeleyformattedCitation(Saunders et al., 2015),plainTextFormattedCitation(Saunders et al., 2015),previouslyFormattedCitation(Saunders et al., 2015),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Saunders et al., 2015) Research methodology is a plan for studying the research problem and constitutes the blueprint for the proposed data collection, measurement and analysis of the data. Research design, Population sample size, sampling procedures and data analysis had been discussed in this chapter. Research Design This is the roadmap or blueprint of fulfilling research objective and answering questions ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9780073521503,abstractThe Twelfth Edition of Business Research Methods reflects a thoughtful revision of a market standard. Students and professors will find thorough, current coverage of all business research topics presented with a balance of theory and practical application. Authors Donald Cooper and Pamela Schindler use managerial decision-making as the theme of Business Research Methods and they provide the content and structure to ensure students grasp of the business research function. This textbook also encourages and supports the completion of an in-depth business research project, if desired, by the professor. Features of the Twelfth Edition include The MindWriter continuing case study has been updated to focus on online survey methodology with Appendix A including a newly redesigned MindWriter CompleteCare online survey. New and revised Snapshots and PicProfiles provide 82 timely mini-cases presented from a researchers perspective, with additional mini-cases added to the accompanying instructors manual. New and revised Closeups offer in-depth examination of key examples. All new From the Headlines discussion questions. The Cases section contains the abstract for the new case Marcus Thomas LLC Tests Hypothesis for Troy-Bilt Creative Development, and an updated case-by-chapter suggested-use chart. Some textbook content has been moved to the Online Learning Center, and includes the Multivariate Analysis chapter, and several end-of-chapter appendices. For more information, and to learn more about the teaching and study resources available to you, visit the Online Learning Center www.mhhe.com/cooper12e CourseSmart enables access to a printable e-book from any computer that has Internet service without plug-ins or special software. With CourseSmart, students can highlight text, take and organize notes, and share those notes with other CourseSmart users. Curious Go to www.coursesmart.com,authordropping-particle,familyCooper,givenDonald R.,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familySchindler,givenPamela S.,non-dropping-particle,parse-namesfalse,suffix,edition12,idITEM-1,issueddate-parts2014,number-of-pages723,publisherMcGraw-Hill Education,publisher-placeNew York, NY,titleBusiness Research Methods,typebook,urishttp//www.mendeley.com/documents/uuid0578a8ea-45f5-438a-8d8f-0304a8b9dda9,mendeleyformattedCitation(Cooper Schindler, 2014),plainTextFormattedCitation(Cooper Schindler, 2014),previouslyFormattedCitation(Cooper Schindler, 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Cooper Schindler, 2014), and ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9781292016641,authordropping-particle,familySaunders,givenMark,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyLewis,givenPhilip,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyThornhill,givenAdrian,non-dropping-particle,parse-namesfalse,suffix,edition7th,idITEM-1,issueddate-parts2015,number-of-pages729,publisherPearson Education Limited,publisher-placeHarlow CM20 JE,titleResearch Methods for Business Students,typebook,urishttp//www.mendeley.com/documents/uuid0004f026-48a6-43f0-8ef8-882db516a6f6,mendeleyformattedCitation(Saunders et al., 2015),plainTextFormattedCitation(Saunders et al., 2015),previouslyFormattedCitation(Saunders et al., 2015),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Saunders et al., 2015). Data collection techniques for assessing factors affecting operational risk had been classified in quantitative or qualitative method ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9780073521503,abstractThe Twelfth Edition of Business Research Methods reflects a thoughtful revision of a market standard. Students and professors will find thorough, current coverage of all business research topics presented with a balance of theory and practical application. Authors Donald Cooper and Pamela Schindler use managerial decision-making as the theme of Business Research Methods and they provide the content and structure to ensure students grasp of the business research function. This textbook also encourages and supports the completion of an in-depth business research project, if desired, by the professor. Features of the Twelfth Edition include The MindWriter continuing case study has been updated to focus on online survey methodology with Appendix A including a newly redesigned MindWriter CompleteCare online survey. New and revised Snapshots and PicProfiles provide 82 timely mini-cases presented from a researchers perspective, with additional mini-cases added to the accompanying instructors manual. New and revised Closeups offer in-depth examination of key examples. All new From the Headlines discussion questions. The Cases section contains the abstract for the new case Marcus Thomas LLC Tests Hypothesis for Troy-Bilt Creative Development, and an updated case-by-chapter suggested-use chart. Some textbook content has been moved to the Online Learning Center, and includes the Multivariate Analysis chapter, and several end-of-chapter appendices. For more information, and to learn more about the teaching and study resources available to you, visit the Online Learning Center www.mhhe.com/cooper12e CourseSmart enables access to a printable e-book from any computer that has Internet service without plug-ins or special software. With CourseSmart, students can highlight text, take and organize notes, and share those notes with other CourseSmart users. Curious Go to www.coursesmart.com,authordropping-particle,familyCooper,givenDonald R.,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familySchindler,givenPamela S.,non-dropping-particle,parse-namesfalse,suffix,edition12,idITEM-1,issueddate-parts2014,number-of-pages723,publisherMcGraw-Hill Education,publisher-placeNew York, NY,titleBusiness Research Methods,typebook,urishttp//www.mendeley.com/documents/uuid0578a8ea-45f5-438a-8d8f-0304a8b9dda9,mendeleyformattedCitation(Cooper Schindler, 2014),plainTextFormattedCitation(Cooper Schindler, 2014),previouslyFormattedCitation(Cooper Schindler, 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Cooper Schindler, 2014). The study had used survey carried out during the study, the survey was conducted in five Azania Bank branches in Dar Es Salaam region. On the other hand, descriptive research predominantly used as a link of variables and research problem. The questionnaire and interview was used to collect the data. Though, questionnaire had been used as the main instrument of data collection for operational risk management for identifying the factors that cause operational risks in commercial banks. On the other hand, the researcher used survey method to collect more information with regard to factors that cause operational risk within the bank. This informations had been predominantly known as a self-report, henceforth assisted in the identification of any tools used to manage the operational risks. The interview was conducted to Branch Managers, Assistant-branch managers, operational risk officers, compliance officers, legal personnels, senior managers, and operational risk committee members. The interview aimed at testing the awareness of factors contributing to operational risks, its effects, and awareness on policies, procedures and regulations enforced for effectiveness and control of operational risk management within the bank. Population target All employees or workers of the selected branches of Azania Bank Limited were targeted as the sample space. The sample conducted to five Dar Es Salaam branches, due to limited time, the researcher could not collect data from all nineteen branches across the country. In order to ascertain a reasonable and adequate information, the researcher fairly selected the Dar Es Salaam branches which are Masdo Branch, Kariakoo Branch, Tegeta Branch, Mwenge Branch, Mawasiliano branch, and Head office. Sampling procedure, sample selection, and techniques Techniques to be used when obtaining a sample shall be dealt in this section. Sampling procedures and methods used in selecting the sample shall be deeply analysed. Sampling procedure The researcher used random sampling in selecting branches. With this techniques, all branches were having equal chances of being selected, thus all the 5 selected branches and head office located in Dar Es Salaam were equally selected. The study covered respondents from the selected branches and head office staff, but during choosing this sample the researcher used cluster sampling. This is the case as all the selected branches and head office has similar characteristics in operational risk management. The respondent was mainly selected basing on the role played in executing their tasks. This ranged from the executive committee, operational risk committee, business lines, compliance officer, branch officers, as well as IT personnel were involved. The mentioned committee and staff are the major stakeholders in operational risk management within the bank. Sampling Technique Basing on the nature of the study, the researcher used the purposive and simple random sampling techniques to select the sample. The main motive of using this technique was to ensure that each member of the population had equal chances of selection, and equally involved in the study. Quantitative method was used in order to preclude bias in the gathering and presentation of data, which is believed to be the most objective, and reliability for the research undertaken. Study area As the researcher was undertaking the study on factors affecting/causing operational risks in commercial banks, application of sampling techniques was inevitable. The study area used was only in Dar Es Salaam, where the branches and head office are located. Instruments for data collections The researcher collected data at Azania Bank Limited by using two main tools. These are the questionnaire and interview. These had been discussed hereunder. Questionnaire A questionnaire was designed to capture all relevant information from the field of study. Questionnaires mostly comprised closed questions than open-ended questions which suited the respondent a wide range of selecting the appropriate answers, at the same time gave wide area of answering what the researcher intended to collect in regard to factors affecting operational risks in commercial banks. On the other hand, scaling techniques was used in the questionnaire, this enabled collection of systematic and standardised measurable, and reliable data from the field, which at the end provided a quantitative measure for precise data quantification. Questionnaires was designed to collect data on how the bank is assessing operational risk, employee awareness on operational risk, how operational risks are managed, and also how the bank had suffered loss due to operational risk. Interview Personal interview was conducted to enable the researcher obtain and much exposed on the research questions and hypothesis. Both structured and non-structured questions were used to collect data from the responded. The main aim of administering personal interview is to get more information on areas which were not well covered in questionnaires, data obtained was added to give well-analysed information. Data analysis techniques Data analysis was done basing on the collected data to detect and correct the errors, omissions, and coding. The analysis involved calculation of statistical values including mean performance and descriptive statistics ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9781292016641,authordropping-particle,familySaunders,givenMark,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyLewis,givenPhilip,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyThornhill,givenAdrian,non-dropping-particle,parse-namesfalse,suffix,edition7th,idITEM-1,issueddate-parts2015,number-of-pages729,publisherPearson Education Limited,publisher-placeHarlow CM20 JE,titleResearch Methods for Business Students,typebook,urishttp//www.mendeley.com/documents/uuid0004f026-48a6-43f0-8ef8-882db516a6f6,mendeleyformattedCitation(Saunders et al., 2015),plainTextFormattedCitation(Saunders et al., 2015),previouslyFormattedCitation(Saunders et al., 2015),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Saunders et al., 2015). Descriptive statistics include tabulation and organisation of data in order to demonstrate their main characteristics and involves the use of techniques such as measures of central tendency, measures of dispersion, correlation and graphical presentations ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9781292016641,authordropping-particle,familySaunders,givenMark,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyLewis,givenPhilip,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyThornhill,givenAdrian,non-dropping-particle,parse-namesfalse,suffix,edition7th,idITEM-1,issueddate-parts2015,number-of-pages729,publisherPearson Education Limited,publisher-placeHarlow CM20 JE,titleResearch Methods for Business Students,typebook,urishttp//www.mendeley.com/documents/uuid0004f026-48a6-43f0-8ef8-882db516a6f6,mendeleyformattedCitation(Saunders et al., 2015),plainTextFormattedCitation(Saunders et al., 2015),previouslyFormattedCitation(Saunders et al., 2015),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Saunders et al., 2015). On the other hand, a Chi-Square had been used to analyse relationships between variables. Statistical computer package (SPSS) had also used for data analysis and summarization, the analysis of data was performed in order to achieve the research objective. General description on how the commercial banks manage and are affected by operational risk had been detailed analysed, including operational risk framework, operational risk policy, operational risk strategy, identification, monitoring and control, and the tools used to assess operational risk. The responses from personal interview had been summarized with the view to make some tables, charts, and percentages wise. On the other hand, the recommendations from respondents had been documented to form a base of research recommendations. Ethical Considerations Ethical issues in the study of research is of paramount importance to safeguard the interest of respondents. That is to say privacy, confidentiality, and personal consent to participate in the study as well as secrecy ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9781292016641,authordropping-particle,familySaunders,givenMark,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyLewis,givenPhilip,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyThornhill,givenAdrian,non-dropping-particle,parse-namesfalse,suffix,edition7th,idITEM-1,issueddate-parts2015,number-of-pages729,publisherPearson Education Limited,publisher-placeHarlow CM20 JE,titleResearch Methods for Business Students,typebook,urishttp//www.mendeley.com/documents/uuid0004f026-48a6-43f0-8ef8-882db516a6f6,mendeleyformattedCitation(Saunders et al., 2015),plainTextFormattedCitation(Saunders et al., 2015),previouslyFormattedCitation(Saunders et al., 2015),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Saunders et al., 2015). According to Cooper, ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9780073521503,abstractThe Twelfth Edition of Business Research Methods reflects a thoughtful revision of a market standard. Students and professors will find thorough, current coverage of all business research topics presented with a balance of theory and practical application. Authors Donald Cooper and Pamela Schindler use managerial decision-making as the theme of Business Research Methods and they provide the content and structure to ensure students grasp of the business research function. This textbook also encourages and supports the completion of an in-depth business research project, if desired, by the professor. Features of the Twelfth Edition include The MindWriter continuing case study has been updated to focus on online survey methodology with Appendix A including a newly redesigned MindWriter CompleteCare online survey. New and revised Snapshots and PicProfiles provide 82 timely mini-cases presented from a researchers perspective, with additional mini-cases added to the accompanying instructors manual. New and revised Closeups offer in-depth examination of key examples. All new From the Headlines discussion questions. The Cases section contains the abstract for the new case Marcus Thomas LLC Tests Hypothesis for Troy-Bilt Creative Development, and an updated case-by-chapter suggested-use chart. Some textbook content has been moved to the Online Learning Center, and includes the Multivariate Analysis chapter, and several end-of-chapter appendices. For more information, and to learn more about the teaching and study resources available to you, visit the Online Learning Center www.mhhe.com/cooper12e CourseSmart enables access to a printable e-book from any computer that has Internet service without plug-ins or special software. With CourseSmart, students can highlight text, take and organize notes, and share those notes with other CourseSmart users. Curious Go to www.coursesmart.com,authordropping-particle,familyCooper,givenDonald R.,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familySchindler,givenPamela S.,non-dropping-particle,parse-namesfalse,suffix,edition12,idITEM-1,issueddate-parts2014,number-of-pages723,publisherMcGraw-Hill Education,publisher-placeNew York, NY,titleBusiness Research Methods,typebook,urishttp//www.mendeley.com/documents/uuid0578a8ea-45f5-438a-8d8f-0304a8b9dda9,mendeleyformattedCitation(Cooper Schindler, 2014),plainTextFormattedCitation(Cooper Schindler, 2014),previouslyFormattedCitation(Cooper Schindler, 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Cooper Schindler, 2014), unethical activities are pervasive and include violating nondisclosure agreements, breaking participant confidentiality, misrepresenting results, deceiving people, using invoicing irregularities, avoiding legal liability, which were not part of this study. Clearance of research had been obtained from the University of Dar Es Salaam Business School authorities who allowed a researcher to contact the Azania Bank Management for the request to collect data. Validity of the Study According to ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9781292016641,authordropping-particle,familySaunders,givenMark,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyLewis,givenPhilip,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familyThornhill,givenAdrian,non-dropping-particle,parse-namesfalse,suffix,edition7th,idITEM-1,issueddate-parts2015,number-of-pages729,publisherPearson Education Limited,publisher-placeHarlow CM20 JE,titleResearch Methods for Business Students,typebook,urishttp//www.mendeley.com/documents/uuid0004f026-48a6-43f0-8ef8-882db516a6f6,mendeleyformattedCitation(Saunders et al., 2015),plainTextFormattedCitation(Saunders et al., 2015),previouslyFormattedCitation(Saunders et al., 2015),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Saunders et al., 2015), validity of the study refers to how a test measure is supposed to be measured, thats is describing in a wide range in qualitative studies. The concept is not fixed or universal rather a contingent construct, obviously grounded in the process and intention of particular research methodology. Some qualitative research has argued the applicability of validity in research work, however, it has been realised that the need for qualifying the research is paramount important ADDIN CSL_CITATION citationItemsidITEM-1,itemDataISBN9780073521503,abstractThe Twelfth Edition of Business Research Methods reflects a thoughtful revision of a market standard. Students and professors will find thorough, current coverage of all business research topics presented with a balance of theory and practical application. Authors Donald Cooper and Pamela Schindler use managerial decision-making as the theme of Business Research Methods and they provide the content and structure to ensure students grasp of the business research function. This textbook also encourages and supports the completion of an in-depth business research project, if desired, by the professor. Features of the Twelfth Edition include The MindWriter continuing case study has been updated to focus on online survey methodology with Appendix A including a newly redesigned MindWriter CompleteCare online survey. New and revised Snapshots and PicProfiles provide 82 timely mini-cases presented from a researchers perspective, with additional mini-cases added to the accompanying instructors manual. New and revised Closeups offer in-depth examination of key examples. All new From the Headlines discussion questions. The Cases section contains the abstract for the new case Marcus Thomas LLC Tests Hypothesis for Troy-Bilt Creative Development, and an updated case-by-chapter suggested-use chart. Some textbook content has been moved to the Online Learning Center, and includes the Multivariate Analysis chapter, and several end-of-chapter appendices. For more information, and to learn more about the teaching and study resources available to you, visit the Online Learning Center www.mhhe.com/cooper12e CourseSmart enables access to a printable e-book from any computer that has Internet service without plug-ins or special software. With CourseSmart, students can highlight text, take and organize notes, and share those notes with other CourseSmart users. Curious Go to www.coursesmart.com,authordropping-particle,familyCooper,givenDonald R.,non-dropping-particle,parse-namesfalse,suffix,dropping-particle,familySchindler,givenPamela S.,non-dropping-particle,parse-namesfalse,suffix,edition12,idITEM-1,issueddate-parts2014,number-of-pages723,publisherMcGraw-Hill Education,publisher-placeNew York, NY,titleBusiness Research Methods,typebook,urishttp//www.mendeley.com/documents/uuid0578a8ea-45f5-438a-8d8f-0304a8b9dda9,mendeleyformattedCitation(Cooper Schindler, 2014),plainTextFormattedCitation(Cooper Schindler, 2014),previouslyFormattedCitation(Cooper Schindler, 2014),propertiesnoteIndex0,schemahttps//github.com/citation-style-language/schema/raw/master/csl-citation.json(Cooper Schindler, 2014). Under this study, the validity of research findings is more less the same with the pilot study. Pilot study showed that the issue of operational risk among commercial banks were not effectively implemented. References ADDIN Mendeley Bibliography CSL_BIBLIOGRAPHY Basel Committee on Banking Supervision, B. (2001a). Principles for the Sound Management of Operational Risk. BIS 2001, 1(June). Basel Committee on Banking Supervision, B. (2001b). Sound Practices for the Management and Supervision of Operational Risk Management. BIS Dec 2001, 2(December). Basel Committee on Banking Supervision, B. (2001c). Working Paper on the Regulatory Treatment of Operational Risk. Working Paper on the Regulatory Treatment of Operational Risk, 136(9), 30. https//doi.org/10.1001/archsurg.136.9.1000 Basel Committee on Banking Supervision, B. (2002). Operational Risk Data Collection and Loss event type classification. Management, (May 2001). Basel Committee on Banking Supervision, B. (2003). Sound Practices for the Management and Supervision of Operational Risk Management. Sound Practices for the Management and Supervision of Operational Risk Management, 62(February), 245. https//doi.org/10.1016/S0031-9422(02)00552-6 Basel Committee on Banking Supervision, B. (2009). Enhancements to the Basel II Framework. Enhancements to the Basel II Framework, (July), 141. Retrieved from http//www.lw.com/upload/pubContent/_pdf/pub3945_1.pdf Basel Committee on Banking Supervision, B. (2011). Principles for the sound management of Operational Risk Management, (June). Basel Committee on Banking Supervision, B. (2014). Review of the principles for the sound management of Operational Risk. BIS 2014, (October). BOT Banking Operation, B. (2018). Licensed Banks. Retrieved from https//www.bot.go.tz/BankingSupervision/Directory of Banks and Financial institutions operating in Tanzania _June 2017.pdf BOT Banking Supervision, B. (2010). Risk Management Guidelines for Banks and Financial Institutions (2nd ed.). Dar Es Salaam BOT. BOT Banking Supervision, B. (2014). The Banking and Financial Institutions (Capital Adequacy) Regulations, 2014, (297), 145. Christensen, T., Laegreid, P. (2005). Regulatory Reform and Agencyfication, Working Pa, 142. Cooper, D. R., Schindler, P. S. (2014). Business Research Methods (12th ed.). New York, NY McGraw-Hill Education. COSO, T. C. of S. O. of the T. C. (2004). Enterprise Risk Management Integrated Framework. Risk Management, (September), 1246. https//doi.org/10.1504/IJISM.2007.013372 Crouhy, M., Galai, D., Mark, R. (2014). The Essential of Risk Management, Effectively implement an Enterprise Risk Management. Effective Utilisation of Enterprise Risk Management (2nd ed.). New York McGraw-Hill Education. https//doi.org/10.1016/B978-0-12-401666-8.00011-X Ergashev, B., Mittnik, S., Sekeris, E. (2013). A Bayesian approach to extreme value estimation in operational risk modelling. The Journal of Operational Risk, 8(4), 5581. https//doi.org/10.21314/JOP.2013.131 Johnemark, A. (2012). Modelling Operational Risk. Unpublished Paper, Royal Institute of Technology Stockholm. M.M. Chijoriga. (1997). Application of Credit Scoring and Financial Distress Prediction Models to Commercial Banks Lending, the Case of Tanzania. The Case of Tanzania. Mugenda, G. N., Momanyi, G., Naibei, I. K. (2012). Implications of Risk Management Practices on Financial Performance of Sugar Manufacturing Firms in Kenya. Research Journal of Finance and Accounting, 1(1), 1429. Neary, B. (2014). Operational Risk, what is it and how can you manage it Niekerk, A. Van, Geldenhuys, D. J., Levin, M. M., May, M., Moalusi, G. (2012). Implementing an Operational Risk Management Framework Psycho-Social Factors in Tanzania. In Journal of Psychology in Africa January 2012, 22(1), 7786. https//doi.org/10.1080/14330237.2012.10874524 Prokopenko, Y., Bondarenko, D. (2012). Operational Risk Management Best Practice Overview and Implementation Risk. IFC International Finance Corporate, (Sep). Retrieved from http//www.ifc.org/wps/wcm/connect/e4f8ce004d6f9e3d85c8b548b49f4568/ECA-CR_OPRISK_training.pdfMODAJPERES Robertson, D. (2016). Managing Operational Risk, Practical Strategies to Identify and Mitigate Operational Risk within Financial Institutions. Managing Operational Risk Practical Strategies to Identify and Mitigate Operational Risk within Financial Institutions, 1190. https//doi.org/10.1007/978-1-137-44217-8 Saunders, M., Lewis, P., Thornhill, A. (2015). Research Methods for Business Students (7th ed.). Harlow CM20 JE Pearson Education Limited. Retrieved from www.pearson.com/uk The Government Office for Science, L. (2014). Innovation Managing risk, not avoiding it. Annual Report of the Government Chief Scientific Adviser 2014. Innovation Managing Risk, Not Avoiding It. The Government Office for Science, London, 111. Retrieved from https//www.gov.uk Thirlwell, J., Blunden, T. (2013). Mastering Operational Risk, A Practical guide to understanding operational risk and how to manage it. (2nd ed.). Harlow CM20 JE, UK Pearson Education, Inc. Van Greuning, H., Brajovic Bratanovic, S. (2009). Analysing Banking Risk A framework for assessing corporate governance and financial risk management. The International Bank for Reconstruction and Development. https//doi.org/10.1596/0-8213-4417-X APPENDICES Appendix I Questionnaire Answered by employees who have worked with the banks for more than six months from selected banks in Dar es Salaam Region. Preamble Dear Colleague, Please assist the researcher to collect information for a research study on the factors affecting operational risks in commercial banks, in Tanzania, a case study of Azania bank limited. How long have you been employed by the bank Years. Months.. What is your highest education level attained Certificate., Diploma., Bachelor Degree, Masters degree., Doctorate degree ABL has a risk management and compliance department YES, NO… Is there any operational risk policies in your work organisation YES., NO… Tick the most accurate answer Appendix II Interview What are the major roles of Risk and compliance department Are the policies, procedures, internal limits effective for mitigation of operational risk within the bank What could be the essential factors that do contribute operational risks within Azania Bank Limited In what frequency do Azania Bank employees are trained or made aware of operational risks What are your recommendations for improvement of operational risk management PAGE MERGEFORMAT 24 Tools for Risk Management Operational Risk Awareness/Training on Risks Management Risk exposures Y, yu),[email protected]
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