Strategies Adopted by the Standard Chartered Bank in Kenya to Mitigate Operational Risks

Abstract

The banking industry faces a very turbulent and dynamic environment, this therefore affects the industry posing both controllable and uncontrollable risks. Banks are exposed to various risks which if not managed would result in revenue leakages, directly impacting their profits. The banks have faced a number of financial crises as a result of mismanaged risks. This raises critical questions about the way banks manage their risks. From the different studies done, it is clear that a lot of focus has been given to the traditional risks; credit, liquidity, reputation risks. Little attention is given to operational risks and the role they play in such a crisis. Operational risks are inherent in all business lines in banks and due to this operational risk management is a vastly underrated discipline that needs more research. Proper operational risk mitigation, would help to protect business performance ensuring sustainable results. This study focused to exhibit how the strategic use of robust risk management practices can cushion the banking sector from losses. More specifically, the study looked at the strategies used in managing operational risks of Standard Chartered Bank in Kenya. The key operational risks that Standard Chartered Bank in Kenya faces were noted to be transactional errors, system failures, process failure, failure to comply with regulations and risks emanating from staff. The study identified the operational risk mitigation strategies adopted by the bank as centralisation and specialization of process development and operational risk management, continual and consistent communication of the code of conduct to staff, server replication across different markets, Disaster Recovery sites and Business Continuity Planning and investing in robust reporting systems. The study further indicated that these strategies had been effective in the area of addressing operational risks of the bank. However, the study noted that the strategies had not been effective in addressing the risk of potential loss of experienced talent to competitors and the market. Impliedly therefore, the management of the bank in Kenya would have to review the strategies adopted to address this risk.