A STUDY ON OPERATIONAL RISK IN BANKS

Abstract

Operational risk in banks refers to the possibility of financial losses resulting from inadequate or failed internal processes, human errors, system failures, or external events. Effective management of operational risk is essential for maintaining financial stability, ensuring regulatory compliance, and protecting customer confidence. This study examines the nature, sources, and impact of operational risk in the banking sector, with a focus on identifying key risk factors and evaluating the effectiveness of risk management practices adopted by banks. The study highlights the role of internal controls, technology, employee training, risk assessment frameworks, and regulatory guidelines in minimizing operational losses. It also emphasizes the growing importance of cybersecurity and digital risk management in modern banking operations. The findings suggest that a proactive operational risk management framework enhances organizational resilience, improves operational efficiency, and contributes to the overall financial performance and sustainability of banks in an increasingly complex and technologydriven banking environment.