How does the pandemic change operational risk? Evidence from textual risk disclosures in financial reports

IF 0.4 4区经济学 Q4 BUSINESS, FINANCE

Journal of Operational Risk Pub Date : 2022-01-01 DOI:10.21314/jop.2022.017

Yinghui Wang, Ya-Feng Chang, Jianping Li

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引用次数: 2

Abstract

This paper studies how the Covid-19 pandemic changed the operational risk profiles of the financial industry. We find that the textual risk disclosures in financial reports contain abundant information on operational risk. A text mining method is introduced to analyze changes in operational risk in an innovative way based on a massive textual data set of financial institutions’ textual risk disclosures, which aggregates senior managers’ risk perceptions of the whole financial industry. Based on 4624 financial reports released by 1330 financial institutions from 2017 to 2020, this empirical study finds that operational risk remained the most prominent major risk type after the outbreak of Covid-19, and that disclosures of operational risk increased by 5.19% compared with the samples from before the outbreak. The drivers of operational risk also changed, with significant increases in disclosure of litigation risk, transaction modes and product and service problems as a proportion of total disclosures. In addition, two emerging operational risk drivers identified during the pandemic are data safeguarding and goodwill impairment. Our findings could help financial institutions and regulators to identify and manage the critical drivers of operational risk during a future pandemic. © 2022 Infopro Digital Risk (IP) Limited.

查看原文本刊更多论文

大流行如何改变业务风险?来自财务报告文本风险披露的证据

本文研究了新冠肺炎大流行如何改变金融业的操作风险概况。我们发现，财务报告中的文本风险披露包含了丰富的操作风险信息。基于金融机构文本风险披露的海量文本数据集，汇集了金融行业高管的风险感知，引入文本挖掘方法，创新分析操作风险变化。基于2017 - 2020年1330家金融机构发布的4624份财务报告，实证研究发现，新冠肺炎疫情爆发后，操作风险仍是最突出的主要风险类型，与疫情前样本相比，操作风险的披露增加了5.19%。操作风险的驱动因素也发生了变化，诉讼风险、交易模式、产品和服务问题的披露占总披露的比例显著增加。此外，大流行期间发现的两个新业务风险驱动因素是数据保护和商誉减值。我们的研究结果可以帮助金融机构和监管机构在未来大流行期间识别和管理操作风险的关键驱动因素。©2022 Infopro Digital Risk (IP) Limited。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Operational Risk BUSINESS, FINANCE-

CiteScore

1.00

自引率

40.00%

发文量

期刊介绍： In December 2017, the Basel Committee published the final version of its standardized measurement approach (SMA) methodology, which will replace the approaches set out in Basel II (ie, the simpler standardized approaches and advanced measurement approach (AMA) that allowed use of internal models) from January 1, 2022. Independently of the Basel III rules, in order to manage and mitigate risks, they still need to be measurable by anyone. The operational risk industry needs to keep that in mind. While the purpose of the now defunct AMA was to find out the level of regulatory capital to protect a firm against operational risks, we still can – and should – use models to estimate operational risk economic capital. Without these, the task of managing and mitigating capital would be incredibly difficult. These internal models are now unshackled from regulatory requirements and can be optimized for managing the daily risks to which financial institutions are exposed. In addition, operational risk models can and should be used for stress tests and Comprehensive Capital Analysis and Review (CCAR). The Journal of Operational Risk also welcomes papers on nonfinancial risks as well as topics including, but not limited to, the following. The modeling and management of operational risk. Recent advances in techniques used to model operational risk, eg, copulas, correlation, aggregate loss distributions, Bayesian methods and extreme value theory. The pricing and hedging of operational risk and/or any risk transfer techniques. Data modeling external loss data, business control factors and scenario analysis. Models used to aggregate different types of data. Causal models that link key risk indicators and macroeconomic factors to operational losses. Regulatory issues, such as Basel II or any other local regulatory issue. Enterprise risk management. Cyber risk. Big data.