Operational Risk Management in HSBC

The assignment delves into the realm of operational risk management within HSBC. It examines various aspects including risk management tools, their effectiveness in maintaining performance, the influence of operational risk on workforce and overall performance, and the role of regulatory frameworks like Basel III. The analysis also considers different methods for mitigating operational risks, such as insurance, portfolio diversification, and hedging. Further, it investigates the current operational risk framework's impact on HSBC's operations.

Assessing the impact of operational risk
management on performance of banks- A case
study of HSBC, UK
1

Abstract
Operational risk for a bank is very important as it is associated with bank's daily
operational activities. It occurs because of inclusion of poor skilled workforce, failed
internal system and other related aspect. This in result affect organizational
performance as operation risk management practices deal with several kind of risk such
as internal, external fraud and employment practices as well as workplace safety.
The main objective for conducting the study is to determine the impact of
operational risk management on performance of bank, named HSBC. This particular
study shed light on issues which are being faced by corporation its operation and its
potential impact on overall performance. Here, the case study of HSBC has been
considered under dissertation as it is leading corporation of UK banking sector and
represent the industry. It is the British-based multinational banking which offers financial
services to large number of buyers. This is considered as world's fourth largest bank by
total assets and presently it operates in 71 countries and territories. The cited
organization has four business groups retail banking and wealth management as well
as global banking along with investment banking. Owing to this, case study of HSBC will
be effective for assessing the significance of operational risk management on
performance of bank.
In order to conduct in-depth analysis, qualitative type of research investigation
has been applied in the research. Accordingly both primary and secondary information
are collected. Furthermore, thematic analysis has been used for dissemination of
outcome gathered from collection of information in the direction of aim and objectives.
The findings of study shows that company is facing operational issues such as
money laundering, related to KYC which can be overcome by using effective strategies.
Owing to this, centralized data system, acceptable level of record keeping and
appropriate system are applied.
According to the outcome of the study, it can be suggested organization should
have strong risk culture for mitigation of risk. However, workforce must be skilled and
competent for resoling issues related to operation risk. Apart from this, guidelines set by
Basel and other related authorities should be complied by bank for successful
2

operation. Furthermore, it can also be suggested that specific aspect like impact of
forensic audit in detecting fraud in banking sector of UK can also be carried out.
Moreover, focus should be laid on significance of internal audit in detecting fraud in
different banking sector of UK. In addition to this, comparative analysis should be done
that how other banks are using internal audit as imperative tool for maintaining good
performance in the marketplace. At this juncture, quantitative aspect can be selected for
getting more better results.
3

TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION........................................................................................7
1.1 Overview & Background.........................................................................................7
1.2 Rationale of study...................................................................................................9
1.3 Research aim and objectives................................................................................10
1.4 Significance of study.............................................................................................11
1.5 Limitation of research...........................................................................................12
1.6 Structure of dissertation........................................................................................12
CHAPTER 2:LITERATURE REVIEW.............................................................................14
2.1 Introduction...........................................................................................................14
2.2 Concept of operational risk management in banking sector.................................14
2.3 Sound operational risk management using three line defence model..................15
2.4 Tools and techniques for mitigating risk...............................................................18
2.5 Key theoretical issues...........................................................................................20
2.6 assessing different types of operational risk associated with HSBC bank of UK..22
2.7 Identifying regulations associated with managing operational risk in HSBC bank of
UK...............................................................................................................................26
2.8 Principle for the operation risk management (Basel committee on banking
supervision)................................................................................................................ 28
2.9 Conclusion............................................................................................................30
CHAPTER 3: RESEACH METHODOLOGY ..................................................................31
3.1 Introduction...........................................................................................................31
3.2 Research philosophy............................................................................................31
3.3 Research approach..............................................................................................32
3.4 Research design...................................................................................................32
3.5 Research type...................................................................................................... 33
3.6 Data collection......................................................................................................33
3.7 Sampling approach ..............................................................................................34
3.8 Data analysis........................................................................................................35
3.9 Ethical consideration.............................................................................................35
3.10 Conclusion..........................................................................................................36
CHAPTER 4: DATA DESCRIPTION..............................................................................38
4

4.1 Introduction...........................................................................................................38
4.2 Research limitation..............................................................................................38
4.3 Problem suggestions............................................................................................39
4.4 Conclusion............................................................................................................49
CHAPTER 5: DATA ANALYSIS.....................................................................................50
5.1 Introduction...........................................................................................................50
5.2 Thematic analysis.................................................................................................50
5.3 Analysis of primary data....................................................................................... 50
5.4 Analysis from secondary data...............................................................................55
5.5 Conclusion............................................................................................................61
CHAPTER 6: CONCLUSION AND RECOMMENDATION.............................................62
6.1 Conclusion............................................................................................................62
6.2 Recommendation..................................................................................................64
6.3 Recommendation for further research..................................................................65
REFERENCES...............................................................................................................67
APPENDIX: QUESTIONNAIRE..................................................................................... 76
5

List of figures
Illustration 1: Line of defence......................................................................................... 13
Illustration 2: Risk mitigate tools.....................................................................................15
Illustration 3: Risk loss events........................................................................................18
Illustration 4: Operational risks in Banking.....................................................................20
6

List of abbreviations
 HSBC- Hongkong and Shanghai Banking Corporation
 IT- Information Technology
 UK- United Kingdom
 CORF- Corporation operational risk management function
 KRIs- Key Risk Indicator
 PRA- Prudential Regulation Authority
 FCA- Financial Conduct Authority
 MIS- Management information system
 CSR- Corporate social responsibilities
7

CHAPTER 1: INTRODUCTION
1.1 Overview & Background
Banking sector is the most important aspect behind growth and development of a
nation. It supports in effective management of financial activities and ensure proper
circulation of money for industrial development. Banks face different kind of risk such as
market, credit and operational which are effectively managed and understood but the
issues exist with operational risk (Sun and Chang, 2011). Earlier, operational risk was
commonly defined as every type of unquantifiable risk which are being faced by a bank.
However, operational risk is referred as the risk of monetary losses due to inadequate
or failed internal processes, systems and people. Furthermore, external events also
create operational risk for organization and affect performance of the same to a great
extent. Moreover, external events such as a natural disaster which tends to affect
physical assets or electrical or telecommunications failures. It spoils overall business of
corporation because recovery takes relatively longer time (Fethi and Pasiouras, 2010).
Similarly, operational risk is also faced in term of employee fraud and product flaws
through which rate of return of firm may be decreased.
The role of operational risk is very important in an organization and better
mitigation of the same will bring the appropriate outcome. In this manner, a company
suffering from issues of lack of profitability and low sales turnover can easily manage all
business activities. It assists business entities to focus upon specific issues which are
creating issues in successful operation of business. However, credit risk and marketing
risk are estimated for future time span because they are closely related to financial
performance of banks (Pagach and Warr, 2010). In the same manner, operational risk
of banks is also estimated in order to resolve some of the major issues creating barriers
in creating competitive edge of the business. Many a times, banks get issues related to
fraudulent activities because incompetent workforce and failed software or technologies
(Gillet, Hübner and Plunus, 2010). This are considered as the specific operational
issues affect business of banks to a great extent. The issues of poor management of
internal activities or processes tend to increase operation risk as it increases chance of
8

fraud etc. This is also the reason of unexpected loss because greater the operation risk,
the greater the losses which was not expected.
Furthermore, effect of not complying regulations, appropriate law as well as
implicit rules is also the reason behind higher operational risk. However, this is not the
only way to reduced the same because management should continuous supervise all
working affairs. In such manner corporation can integrate all business activities and risk
associated with operational activities will be reduced to a great extent (Olweny and
Shipho, 2011).
Present report is based on HSBC, British-based multinational banking and
financial services company. This is considered as world's fourth largest bank in term of
total assets. It has operation across 71 countries with 6000 offices. The business
groups of banks consist of retail banking and wealth management, commercial banking
as well as global private banking. In addition to this, investment banking is also included
for the purpose of meeting organizational objectives by increasing customer base. It
facilitates to provide variety of services to end users and meet their expectations in an
effectual manner. Moreover, HSBC is listed on Hong Kong Stock Exchange and London
Stock Exchange. Operation of banks in number of countries creates issues in
successful management of business activities. Owing to this, issues like fraud, poor
management and other related negative aspect might occur at workplace. For this
purpose, effective operational risk management practices are implemented by the
management to assess risk along with corrective action (Sun and Chang, 2011).
The organization like HSBC manages the risk by assigning qualified personnel
and IT expert along with keen attention of internal systems (Hasan and Dridi, 2010).
This aspect play important role in managing business of bank in all of its branches as it
is expanded in many countries. In such manner, management focuses upon highlighting
appropriate alternative for effective internal management of business transaction.
However, organization follow regulatory standard for its ethical conduct of business
through which business meet expectations of all its stakeholders (Fiordelisi and
Molyneux, 2010). In the same manner, training and learning program are conducted for
9

employees so they can learn regarding regulations and procedures applied in internal
management of business.
1.2 Rationale of study
In the current era banking sector has issue of compliance of regulatory
framework. It is because business entities must work in the boundary of regulatory
framework so that accordingly ethical standard can be ensured. Owing to this, the main
objective for conducting the study is to determine the impact of operational risk
management on performance of bank, named HSBC. This particular study shed light on
issues which are being faced by corporation its operation and its potential impact on
overall performance. For this purpose, researcher conducts in-depth study for assessing
the importance of operational risk management in reducing the risk for bank and
ensures their successful operation. It focuses upon detail discussion of effective
management of risk related to operation activities which are used by banks. Also, it will
be effective in assessing the importance of different strategies and tools applied by
management of bank for resolving such kind of issues.
The study on assessing the impact on operational risk management in banking
sector also provides suggestions to improve the performance. At this juncture, different
objectives are taken into consideration such as concept of operational risk management
along with discussion on different types of risk associated with selected corporation.
However, banks are to work in the regulatory boundary for ensuring their ethical
conduct. It proves to be effective to meet expectations of stakeholders and standard
which are set for long run growth. Owing to this, regulations associated with managing
operational risk in HSBC bank of UK are also explained which in turn business can
satisfy buyers.
The main purpose behind carrying out the study is to identify the importance of
operational risk management for banks. It will also be studied that how these strategies
are applied by business for reducing overall risk. If such kinds of strategies are
effectively implemented at workplace then banks like HSBC can easily detect the risk. It
is also effective for increasing sales turnover and increasing customer base for banking
10

sector operating in UK. Overall study focuses upon assessing impact different
operational risk management on performance of bank.
1.3 Research aim and objectives
Aim and objectives of any study are very important which provide information
related to purpose of the study in clear manner. Research aim for study on operational
risk management is mentioned as follows-
Aim- To determine the impact of operational risk management on performance of
banks: A case study of HSBC, UK
Objectives-
The objectives of current study are explained as follows. With the help of
research objectives, appropriate outcome is drawn that proves to be effective for
meeting research purpose. The objectives of study are framed in accordance with aim
so it ease to accomplish the same.
 To understand the concept of operational risk management in banking sector.
 To assess different types of operational risk associated with HSBC bank of UK
 To identify the regulations associated with managing operational risk in HSBC
bank of UK To recommend different ways for reducing operational risk in HSBC bank of UK
Research question
Research questions are formed on the basis of research objectives through
which it becomes convenient for researcher to collect large amount of information. The
research questions for current study on impact of operational risk management in
banking sector are listed as follows-
 What is the concept of operational risk management in banking sector?
 What are different types of operational risk associated with HSBC bank of UK?
 What are regulations associated with managing operational risk in HSBC bank of
UK?
 What suggestions with regard to different ways for reducing operational risk in
HSBC bank of UK?
11

1.4 Significance of study
The current study is very essential for determining the impact of operational risk
management on performance of banks. With completion of the current report, HSBC will
come to know different measures that can be applied for detecting risk on right time. It
facilitates to ensure free flow of transaction and expectations of clients can also be met
effectively. With the assessment of regulation affecting business corporation, it
becomes effective to comply with the same by bringing modification in internal work
environment. Furthermore, with the collection of secondary information in the study,
researcher also highlights overall risk associated with business which tends to affect
overall corporation activities. The study will also come out with meaningful outcome
which can be applied in banking to reduce operational risk
Furthermore, focus will be laid on impact on operational risk on business
operation so that accordingly barriers associated with the same can be identified. In this
manner, current study will be effective for HSBC bank to resolve operational issues by
focusing upon problems. However, present study will help number of parties because
researcher work will provide them assistance in different manner. It has been explained
as follows-
 People who belong to the field of academics and preparing themselves for Ph. D
and other degrees will get greater help from the present study on impact of
operational risk. Furthermore, study will be effective in gaining deep
understanding with regard to concept of operational risk management and its
impact on business performance.
 Study will impart overview to the analyst in terms of assessing various measures
of operational risk management as used by HSBC
 The current dissertation will also assist people associated with the field of
literature in providing right direction with the evidence of good amount of
information.
 Therefore, current study is significant for entire sector of banking operating in UK
and along with different parties associated in the same field. This proves to be
effective to become great source of their information.
12

1.5 Limitation of research
A study requires enough time to complete all the procedure associated with it.
Owing to this, main constraint which is faced is related to lack of time. At the same time,
issues were faced while collecting seconday information because access of all sites
was not given. Owing to this, researcher has taken prior permission to access some of
the sites for gathering valuable information. However, time constraint has been resolved
by completing the entire chapter in stipulated time span. Here, structured procedure of
Gantt chart was followed in order to manage the time effectively. Apart from this,
limitations exist in term of collecting some of factual information of bank. However,
appropriate sources are accessed to collect enough information.
1.6 Structure of dissertation
The structure of dissertation provides overview regarding all chapters to be
completed in the study. It helps researcher to disseminate detail information which will
be provided through each chapter. Explanation of each chapter covered in the study are
given as follows- Chapter 1 introduction: This is the first chapter of dissertation which play
important role in providing basic information related to topic. It is helpful to impart
detail with regard to purpose of study and its scope. The chapter of introduction
consists of background, research aim and objectives as well as significance of
study. Along with that, research questions and structure of dissertation are also
included which contain general information related to operation risk management
for effective management of business. Chapter 2 Literature review: This is the second chapter of study consists of
large amount of information related to topic. This chapter is completed by taking
into account several sources of secondary information which proves to be
effective in producing valid outcome. Furthermore, researcher access journals,
books and online articles and accordingly information related to concept and
appropriate approaches of risk management tools are explained. Chapter 3 Research methodologies: This is the third chapter of dissertation
which incorporation information related to tools and techniques which are applied
13

in the study. It includes explanation of research design, approach and type of
research through which valid outcome of study can be produced. In addition to
this, all selected research methods are explained in the respective chapter along
with proper justification. Chapter 4 Data description: After completion of third chapter, next chapter of
data description has begun. Under this, researcher provides overview related to
collected data. It can be in the form of tables and diagrams providing clear
description of collected data. It facilitates to reach at the outcome of the study as
description is given in the direction of research aim and objectives. Chapter 5 Data analysis: After giving description of all data, researcher then
analyzes the collected information in proper structure. Here, discussion of
collected data is done by focusing upon aim and objectives. Thematic analysis of
qualitative technique will underpin the data analysis chapter.
 Chapter 6 Conclusion and recommendations: This is the last chapter of study
under which conclusion is drawn in accordance with collected information.
However, recommendations are also provided on the basis of collected
information. It proves to be effective to reach at the aim of the study and meet
research objectives in an effectual manner.
14

CHAPTER 2:LITERATURE REVIEW
2.1 Introduction
Literature review is the important chapter of the dissertation under in which
essential information are incorporated. This supports the study to a great extent by
providing evidence on the basis of collected information. Under this, research access
number of sources of information such as journals, books and online articles which aids
to produce valid outcome. In the current study on “impact of operational risk
management on performance of banks” literature review has been done by preparing
themes in accordance with the research objectives. For this purpose, all concepts of
operational risk management in banking sector evaluated. It is helpful for understanding
the importance of operational risk management in an effective operation of banks. In
addition to this, under second theme assessment has been done on different types of
operational risk which are associated with HSBC bank of UK. The description of
operation risk provides ideas related to potential strategies or practices which can be
applied for reducing the same. Apart from this, regulations associated with management
of operational risk in HSBC bank of UK are identified in the third theme. In such a
manner, different studies carried out by other scholars have been accessed by the
researcher for addressing research problem.
2.2 Concept of operational risk management in banking sector
According to Ames, Schuermann and Scott (2015) operational risk is a loss to
bank due to number of reason. It consists of failed internal processes, inadequate
people and external events as well as the poor management. These stated elements
are important for corporation and it must be focused the management to ensure long
run growth and success of the business. For this purpose, operational management
practices are implemented at the workplace to stop breakdown of four causes such as
processes, system and external factors as well as people. The risk related to operation
activities in bank is identified at first and then exposures to those risks are measured
effectively to ensure that capital planning and monitoring program are in the place.
Furthermore, risk management process involves variety of measures for the purpose of
risk monitoring along with need of capital is assessed on the ongoing basis. Apart from
15

this, dissemination of information related to risk mitigation to senior manager which will
be effective for reducing risk to a great extent.
Badescu and et.al., (2015) stated that, sound internal governance is the
imperative aspect through which effective operational risk management framework is
established. Here, it is ensured that how effectively internal operation is going on in
accordance with ethical standard. This facilitates in meeting the requirement of all
associated stakeholders and achieving their satisfaction level to a great extent. Berger,
Bouwman and et. al., (2016) argued that internal control is the most effective aspect
under which day to day business is managed effectively for the purpose of ensuring
effective as well as efficient management of all bank activities. At this juncture,
emphasis is laid on reliable information, applicable laws, regulation which plays an
important role in satisfying the clients. However, chances of fraud will be reduced to a
great extent if focus will be laid on all mentioned aspect of bank.
2.3 Sound operational risk management using three line defence model
According to Berger, Imbierowicz and Rauch (2016) sound operational risk
governance is followed at different level such as business line management, an
independent review and an independent corporation operational risk management
function (CORF). However, the common industry practices might vary in accordance
with size, nature and complexity associated with bank. Every bank has different risk
profile and accordingly degree of formality of implementation of three lines of deference
is implemented. It can be critically evaluated that risk management practices of bank
are fully integrated with operational risk governance function which in turn fraud and
other related unfair activities can be detected in relativity less time span. Here, the first
line defence is of business line management who is responsible for identifying effective
management of risk inherent in the activities, processes and products as well as
system. In case of compliance of regulatory framework and policies of Bank, line
management can establish sound operational risk governance.
16

(Source:The three lines of defense in effective risk management and control, 2013)
Bromiley and et.al., (2015) explained that second line of defence is of CORF
which performs the function of complementing the operational risk management
activities of the business line. Here, degree of dependence makes a huge difference as
scale of bank determines the same. For instance, large banks will work in accordance
with risk generating business lines and covers activities related to design, maintenance
and continuous development of operational risk framework in an organization. For this
purpose, CORF covers different functions such as measurement of operational risk,
responsibility for board reporting and risk. It will be effective for banks to understand the
risk associated with operational activities and resolve the same by applying effective
aspects. Apart from this, second line of defence focuses on risk control and compliance
under which degree of dependence remain limited to certain extent. Furthermore,
management of banks perform several functions for related to risk management through
which effective monitoring will be done for first line of defence control (Doughty, 2016).
At this juncture, risk owners get effective assistance in order to pass on all important
details related to operational risk. On the other hand, a compliance function consists of
monitoring of risk associated with noncompliance of applicable laws and regulations.
For better communication and reduction in risk factor, the separate function reports
17
Illustrati

directly to senior management, directly to the governing body and some of the business
sectors. Multiple compliance functions work better in the large corporation which shed
light on compliance of specific aspects such as supply chain, quality monitoring,
environment as well as health and safety of bank. It reflects that second line of defence
play significant role in effective implementation at first line. Bushman and Williams
(2015) argued that, functions of second defence consists of supporting management
policies and defining roles as well as responsibilities which will be effective for better
coordination of corporation. Apart from this, providing risk management framework is
also the major function of under which small risk are detected at very beginning.
Moreover, some known and emerging issues are also identified through different
functions of first line defence.
Third line defence is of independent review and challenges related to control,
processes and system which aid to manage the operational risk in an effective manner.
It can be critically evaluated that in case of involvement of less competent workforce,
banks cannot effectively implement such types of practices at workplace. Owing to this,
it becomes crucial to involve trained and competent workforce who actively helps to
reduce risk and ensure successful operation of the business. It would be better to
include suitable qualified external parties because they are experienced enough and
predict risk associated with corporation by assessing financial statement or other related
information. Therefore, third level is all about internal control under which audit also
proves to be effective. For this purpose, day to day operation is managed under the
supervision of skilled and qualified workforce who will provide information related to any
kind of difficulties to management.
According to Epure and Lafuente (2015) strong risk culture is required in an
organization which facilitates to inter-connect all departments. At the same time, good
communication among three defences is also an important aspect through which better
coordination can take place. However, at the time of assigning role in assessing risk
management process, it would be better to keep risk owners or managers in first line of
defence. It facilitates to coordinate between other departments in accordance with the
set of regulations. Here, operating management is responsible for all issues which takes
18

place at the first line so that responsible person can work upon the set parameters for
resolving the issues.
2.4 Tools and techniques for mitigating risk
Risk mitigation is the most important concept for successful operation of bank. It
is because changes in external environment affect entire operation of business to a
great extent under which financial corporations are required to change their strategies
time to time. Chorafas (2003) asserted that two major ways of risk management consist
of actions, instruments. Here, actions or approaches include transfer, management and
avoidance or elimination. On the other hand, instruments such as set policy, insure,
diversity and hedging are included.
(Source: Dima and Orzea, 2016)
Here, elimination is the most effective aspect in certain circumstances wherein
management of bank try to avoid risk by adopting appropriate strategy. For this
purpose, HSBC can decide to eliminate certain risks which might affect its financial
position in coming time period. At this juncture, such kind of risks are eliminated by
using strategies like portfolios diversification. This portfolio diversification reflects that
19
Illustration 2: Risk mitigate tools

bank will invest in different segment through which in case of occurrence of loss in one
department, it will get benefit from the other one. This ultimately reduces operation risk
related to higher loss and poor performance of corporation.
Buying insurance in the form of options or actuarial insurance also help to
eliminate risk to a creating extent. Use of such kind of strategies provide relief to firm in
case of any kind of contingency. In such manner, HSBC can also use alternative
strategies such as process control, due diligence procedures as well as certain
business policies. On the other hand, for example, HSBC does not want to avoid risk
then management choose the transfer the same to other participants of market. It can
be critically evaluated that for transferring risk bank need to assess about its competitive
edge in the marketplace. Apart from this, some of the risks are very complex for the
business which can not be transferred and managed by bank. However such kind of risk
are not hedged by management of corporation and they are absorbed under the
boundary of set rules and regulations.
Daniels and Ramirez (2008) explained number of techniques for effective
management of risk. Here, diversification is considered as the most important technique
for risk mitigation under which company can easily reduce the chances of failure. This
technique plays important role in reducing frequency of best and worst outcomes. This
will be effective to ensure smooth flow of business at international level. Davydenko and
Matoussi (2010) argued that hedging is also the effective method under which HSBC
established position into one market to offset exposure to price fluctuations in some
opposite position in another market. Here the basic purpose of corporation is to
minimize the unwanted risk to a great extent (HSBC, 2016). Banks like HSBC can used
number of hedging strategies such as insurance policies, swaps and forward contracts.
Along with that, options, derivatives and over-the-counter as well as future contracts
are also used in order reduce different kind of risk associated with bank.
According to Dima (2009)Internal insurance can be considered as the effective
tool through which some pool of risk are hold by bank at internal level rather to buy
external insurance. At the same time, sufficient amount of capital is put on hold for the
purpose of reducing risk to a great extent. However, efforts are put to absorb the risk at
20

internal level only under company can easily ensure its continuous operation in the
marketplace. Moreover, operation risk of business affects overall performance to a great
extent, hence its management is the important task (Dima and Orzea, 2016).
Apart from this, six key principles are implemented in HSBC for risk mitigation
purpose, Here, the first principle is of board awareness which shows that staff workers
are responsible to provide information related to any kind of fault taking place at
workplace. Furthermore, internal audit is conducted with inclusion of skilled workforce
for detecting risk at very beginning (Managing trade risk, 2016). Third principle is of
senior management implementation and responsibility whereas fourth one is of
identification of risk. However, fifth and sixth principles are monitoring and mitigation
and control respectively. In such manner operation risk is managed through internal
control and monitoring. This is also helpful to avoid some risk and absorb some of them
for improving performance of business.
2.5 Key theoretical issues
The key operation issues which are being faced by HSBC bank are mentioned in
the following table. This table represent five operation risk loss events till June 2016 of
different corporation. It shows that, HSBC holdings plc face issues related to improper
business wherein marketing practices are not working properly. For this purpose, 1575
million dollar loss occurred in retail banking. However, loss of 35 dollar million was also
occurred because of improper business (Risk. Net, 2016). This was occurred in the
sector of trading and sales. It shows that company does not ensure inclusion of better
practices at workplace and in result loss is increasing in different aspect.
21

(Source:Risk. Net, 2016)
HSBC is also suffering from issues related to know-your-customers norms. This
is because corporation is not focusing upon filling the forms related to the same and
clients are provided chance to open their account. It proves to be unethical practices
which affect its operation performance to a great extent. Owing to this, penalty has been
imposed by Reserve bank of India because of unethical conduct of business. At the
same time, issue related to violation of anti-money laundering guidelines was also faced
which in turn poor performance of bank can be assessed. Not only this, but tax aviation
is also the critical issues under which HSBC was providing guidance to clients for
saving their money (Dare, 2015) It is considered as unethical practice wherein
government fail to collect tax from bank because of false representation of financial
statement. This proves to be negative for stakeholders associated with corporation
along with bad image of firm in the marketplace.
Apart from this, issues of under staffing is also reason behind poor performance
of bank. This is because organization is having issue related to anti-money laundering
and know your customers. However, this procedures were implemented for the purpose
of risk mitigation and smooth operation of business. It can be critically evaluated that
22
Illustration 3: Risk loss events

businesses are facing issue in managing the these new rules in different countries and
according operational risk are increased to a some extent (Know-your-customers,
2016).
However, management of HSBC implement operational risk framework on the
basis of four components. It consists of risk identification and assessment,
actions/control. Along with that, KRIs and loss data collection so that risk can be
reduced to a great extent and business activities can be integrated effectively.
Furthermore, workforce are also provided training and need of the same is catered in
advance through which business can easily increase overall rate of return. It can be
critically evaluated that, employee turnover is the crucial issue behind high cost of
operation in company (HSBC, 2016). This might be one of the reason for increasing
loss and operation risk. Owing to this, management of company put efforts to increase
workforce motivation and offer the monetary reward. Furthermore, organization can
integrate all its operational activities and risk framework through which overall
satisfaction among client can be ensured. This is not only about satisfaction of clients
but effective management of operational activities. This proves to be effective for
meeting expectations of buyers.
2.6 assessing different types of operational risk associated with HSBC bank of UK
Operational risks in the banking sector creates a significant impact on the
operational measures and working criteria of the business unit. It creates a well defined
impact on operational measures within the economy which enhances the efficiency of
the working unit. According to Francis, Gupta and Hasan (2015) operational risks for the
businesses are controllable factors which demands an effective regulatory compliance
and well defined monitoring measure in an organization. Gao and et. al., (2015)
evaluated that not long before has operational risk developed a formal position in the
risk management aspect of the baking and financial sector. Researches revealed that
banking is the sector which is entailed high risk aspects for the organizations working
within the sector.
23

(Source:The seven operation risk event type projected by Basel 2. 2016)
The operational risks of the business create insignificant impact on the operational
efficiency and working measures of the companies. This helps the organization in
creating a well defined and significant impact on business operations. Gatzert and
Schmit (2016) analyzed that financial services create an insignificant impact on the
operational measures as it deals with complex tools and resources. It has created a
significant impact on business growth within the market as well. Giannakis and
Papadopoulos (2016) analyzed different types of operational risks for the business
which has fluctuating impact on success aspects of the business unit. Internal fraud is
one of the significant factor which affects the business operations and create an
indefinite impact on operational measures of the company within the competitive
market. Golub (2015) stated internal fraud as one of the significant and most
challenging aspects of operational efficiency. Fraud, misrepresentation or non
compliance by the employees or internal committees of the business faces insignificant
results for the operational aspects. Grote (2015) mentioned that actions related to
internal fraud, forgery, non compliance of regulatory policies, misappropriation of
24
Illustration 4: Operational risks in Banking

assets, thefts, bribes etc are some common aspects of non compliance for the banking
units (Haimes, 2015). This enhances operational risks for the company due to a clear
act of legal actions. BSE Bank of Singapore is one of the most recent example whose
operations were restricted due to money laundering activities by the senior
management of the business. This resulted the bank in losing its merchant banking
operations in the region (Hall, Mikes and Millo, 2015).
External fraud is yet significant aspect of managing operational business risk
within an organization. The challenges faced by the external market creates an
indefinite impact on business inefficiencies and operational aspect. Hardy and Maguire
(2016) analyzed that external risks have an uncontrollable impact on the business
operations and inefficiencies within the economy. Ho and et.al., (2015) stated that
banking operations could effectively suffer due to frauds and misrepresentations
committed by third party within the business aspect. This creates an ineffective impact
on the trust and security factors of the business. The issues related to theft, fraud by
agents or consumers, financial misrepresentation, forgery, data cheating, cyber crime
are some common aspects towards the area. Banking operations as per Lippe, Katz
and Jackson (2015) demands some crucial and sensitive information. The external
party fraud committed for the business operations creates an insignificant impact on
overall business growth and development. Li and et.al., (2015) analyzed that Theft,
cheque fraud, and breaching the system security like hacking or acquiring unauthorized
information are the frequently encountered practices under external fraud (McNeil, Frey
and Embrechts, 2015).
Another aspects analyzed in the field is employee practices and workplace safety
for the business unit. According to Mizgier and et.al., (2015) employees are the assets
of the business unit who demands effective and well defined operational measures to
create a significant aspect on business growth and development. Employees helps in
attaining the business objective and enhance the sales aspects for the company. Non
compliance to employee policies and regulatory needs creates in effective results for
the business unit. Nikolaou, Evangelinos and Leal Filho (2015) stated that high
employee turnover or managing incompetent employee in the banking sector are the
25

key challenges which affects the operational efficiency of the organization. An effective
vigilance practice and managing effective monitoring practice within the market help
banks in generating high and effective business results. Employee and workplace safety
issues pose challenge for the banks as organization brand and reputation is at the stake
for the company in this highly competitive economy.
Failing to meet the promises or deliver the promised quality aspects to the clients
also affect the business efficiency for the banking operations. Consumers are the key
focus of the banks. Negligence in practices by the banks regarding to security issues,
quality aspects, liquidity measures, credibility etc affect operational measures for the
business. Reason (2016) mentioned that Privacy and fiduciary breaches, misuse of
confidential information, suitability issues, market manipulation, money laundering,
unlicensed activities are the common aspects which can affect product defects or
breach consumer trust in the banks (Haimes, 2015).
The external or systematic business risks for the organizations are ineffective
and beyond control (Golub, 2015). The impact of any natural calamities on the
operational efficiency of the business is one of the common and critical factor which
effects the business operations. In addition to Sadgrove (2016) stated that operations
related to Supply-chain disruptions and business continuity have always been a big
challenge for banks. Fault in system hardware/ software affects the brand reputation.
Which creates an insignificant growth aspects for the business unit.
The operational risk aspect demands effective delivery and process management
operations for the business unit. Schönsleben (2016) mentioned that timely delivery and
effective process of execution is an appealing feature for the business unit. Banks and
financial institutions are demanded to manage and maintain well defined process
management for the banks. Failure in processes for the company may affect efficiency
of business outcomes. It may also create misrepresentation or mis-communication for
the business operations. Stulz (2015) stated that the impact of poor organizational
management may affect the credibility reputation and finances of the bank. The above
stated operational risk majors covers significant aspects or challenges faced by every
26

business unit this effect the overall organizational function and growth measures in the
economy.
2.7 Identifying regulations associated with managing operational risk in HSBC bank of
UK
Su and Liu (2015) asserted that regulatory framework play important role in
effective management of operation risk in bank. Here, government lays down several
regulations through which business can ensure ethical conduct. The financial market
regulations has updated its regulatory agenda during 2015. Under this structural reform
and resolution in the financial sector is the main focus wherein restructuring is done for
the purpose of meeting expectations of authorities effectively. For this purpose,
Prudential Regulation Authority of UK has been take steps for clarification of risk
appetite in context of non-EEA banks. It effective effective for fulfilling resolution
requirement of banks. Under this different barriers associated with sector are broken
down so that accordingly banking activities can be managed in an effectual manner. By
using this regulation, complex aspect of long term supervision plan will be developed.
This contributes towards reducing operational kind of risk associated with organization.
Furthermore, Banking Act 2009 specifies regulations with regard to management
of crisis in banking sector. For this purpose, banks failing to deal with crisis can be put
under temporary public ownership. In the same direction, The Turner Review highlights
information related to banking crisis. At this juncture, coordinated international baking
regulations has been established through which banks are rwuirwed to hold more
assets. Here, regulations of liquidity is also taken into account whereby banks are given
specific limit of cash. They are strictly order neither to increase the level of liquidity nor
to decrease the same. This aspect proves to be effective to meet its short as well as
long term obligations. Ward and Peppard (2016) reported that credit limits are also set
by government of nation so that accordingly customers will not face the issue of crisis.
It also crucial for banks to provide training among workforce for their better development
and effective implementations of all policies laid down by management.
The new regulatory framework shed light on new aspect formed for separate risk
taking aspect of finance markets. This is considered as support to banking regulations
27

because banks can handle their financial crisis effectively by making risk at very initial
stage. It was came into effect since April 2013. During 2012 Financial Service Act, the
financial service authorities lost their existence due to introduction of two new
regulation. Here the first one was Prudential Regulatory Authority (PRA) and the other
one is Financial Conduct Authority (FCA) for better management of banks and detecting
inappropriate risk taking place. At this juncture, The FCA, separate from the Bank of
England, was working to ensure that financial marketing is working effective in the line
of set standard and legislation (Banking regulation, 2016). It is responsible for
supervising competition among banks and appropriate management of all banking
activities. It can be critically evaluated that, abusive activities of any of banks is
supervised and legal action is taken against the same for the purpose of reducing
chance of greater risk. Moreover, The FCA is also responsible for all the prudential
regulation of financial services firms which are not examined by the PRA. At the same
time, duty of assets managers is also assigned to FCA through which internal process
as well as control system of banks can be work properly.
Apart from this, PRA is the part of Bank of England which work in accordance
with set standard. It supports country to a great extent with introduction of stable
financial system in UK. Wu, Olson and Dolgui (2015) argued that, stable system is
created by forming number of rules and regulations through which operational risk of all
banks is reduced to a great extent. However, the chances of occurrence of such kind of
risk come to the end level due to strict rules and regulations. Owing to this, bank follow
specific regulations and accordingly operational risk management practices are
developed. This proves to be effective in creating their brand image at international level
and meet expectations of all associated parties. Apart from this, failure to management
of operational risk cause legal decision against the responsible bank. At this juncture,
bank ensures involvement of skilled and experienced workforce who can easily assess
the risk. At the same time, internal audit system or policies are also communicated to
banks so they work accordingly. This will be effective for corporation in reducing
operational risk to a great extent and ensure expansion of the same at international risk.
28

The regulations of PRA is extensive wherein it has responsibility of around 1700
financial institutions, building societies and credit union. Along with that, banks, large
investment firms, deposit takers as well as insurers are included in the responsibilities of
PRA. This in turn effective management of all business activities will be ensured with
increased rate of return. Therefore, regulations are also required to consider by
management of corporation thereby different banking activities will be managed
effectively.
2.8 Principle for the operation risk management (Basel committee on banking
supervision)
According to guidelines of Basel 1 requirement of capital was set in advance in
order to ensure minimal risk transfer. At this juncture, Basel accords are helpful for
effective regulation of banks by focusing upon standard set for the same. It enables
banks to reduce their operation risk by ensuring management of business in
accordance with set standard. Under this, principle of operational risk management are
specified by Basel. The first principle shows that board of directors must ensure to have
strong risk management culture. Accordingly workforce of the corporation will adopt
professional and responsible behaviour. The board of directors and senior management
are highly motivated due strong risk management and that proves to be effective for
long run growth of banks. Apart from this, the board of directors take care of strong
culture in entire organization through which all associated parties easily cater need of
customers or clients. Owing to this, staff working in bank must be understood practices
and policies imposed by upper level management. This aspect facilitates management
to adopt ethical behavior so as to implement all related policies in an effectual manner.
According to Kenneth and Ramirez (2008) board of director can communicate
regarding expectations and accountability among staff members which in turn prove to
be effective for risk management. For this purpose, roles and responsibilities of
workforce is mentioned clear through which they can complete the given task in an
effectual manner. At the same time, senior management need to ensure available of
training among workforce. With the help of training personnel will learn new aspect for
maintaining ethical aspect and in the same direction overall operation risk will be
29

reduced to a great extent. The second principle reflects that banks like HSBC requires
to develop and implement integrated framework with risk management processes.
However, range of factors are considered while integrating framework with risk
management processes. These factors consists of complexity, risk profit and nature as
well as size of business. For this purpose, framework should be documented clearly
along with identification of structure which is used for the purpose of managing
operational risk. At the same time, risk assessment tools are described effectively by
focusing upon management information system (MIS). The role of MIS is very important
under which management of bank like HSBC can effectively report for the risk to their
immediate supervisor.
Third principle of Basel guidelines or regulation shows that framework must be
established, review or approve with specific time span by board of directors. It will be
effective for them to ensue compliance of policies and processes as well as system at
all decision level. This principle is fulfilled by creating control environment with
understanding the nature of operational risk in the strategies of bank. It can be critically
evaluated that effective independent review can be conducted for framework of bank
through which operation of firm can be carried out effectively. In addition to this, fourth
principle shows that tolerance statement and risk appetite for operation risk should be
reviewed and approved by board of directors (Basel Committee on Banking supervision,
2011). However, at the time of revision and approval, management of bank take care of
relevant risk such as level of risk aversion, strategic direction as well as current financial
situation of bank. Apart from this, review will be done by the help considering changes
in the external environment, the quality of the control environment and material
increases in business or activity volumes. Along with that, mitigation strategies and
frequency of loss are also considered for better management of operation risk at
workplace of bank.
Furthermore, fifth principle stated that senior management of bank should
develop consistent line of responsibility for approval by the board of directors. They also
liable for maintaining and implementing policies, system and processes for appropriate
management of risk. For this purpose, senior management of bank like HSBC should
30

transform the framework of operational risk management in the specific procedures and
policies which are implemented in different operational units. Here, it is also important to
encourage workforce for reporting relationships and maintenance accountability.
Moreover, Chorafas (2003) asserted that role of disclose is also very important for
operational risk management in bank names HSBC. At this juncture, formal disclosure
policy of company should also be implemented in bank which will be approved from
board of directors. Not only this, but process for assessment of appropriateness of
disclosure policy is also done by taking into account verification and frequency.
2.9 Conclusion
The entire literature review part concludes that operational risk affect
performance of bank to a great extent. It can be managed by using effective strategies
which tend to improve overall performance. It can also be said that, internal fraud and
external harmful activities generally affect growth potential of bank. Furthermore,
transfer, portfolios diversification and other related strategies are adopted by
corporation for mitigating risk. It has been found that organization is suffering different
issues related to money-laundering and KYC which ,must be addressed with the use of
operational risk management. Apart from this, operational risk management is backed
by different principles and strategies which are adopted by corporation in order to
minimize overall risk and increase overall rate of return of the business. Moreover,
HSBC bank can use strong risk culture and competent workforce through which internal
fraud and other related issues will be addressed in relatively less time span.
31

CHAPTER 3: RESEACH METHODOLOGY
3.1 Introduction
This research chapter creates a clear and in depth picture of research measures
and issues adapted by the companies to create a significant and well defined impact on
research analysis and aims. It creates a well defined picture of the research tools and
techniques adopted by the researcher to attain effective and well defined objectives.
The present study focuses on determining the impact of operational risk management
on performance of banks. For this purpose, different type of tools and techniques are
presented which are employed in accomplishing aim and objective of the research.
Research methodology cover various aspects such as data collection, sampling,
research philosophy and approach and data analysis etc. The stated aspects of the
study will be attained in a structured and effective manner.
3.2 Research philosophy
This is the basic and most crucial aspect of the study which focuses on
developing an effective and well defined base for research study. The outcome of the
stated issue develops a broad overview of data collection and analysis aspect. This
factor of the research study helps in developing a clear picture of analyzing the research
intent and analytic aspects (Fiegen, 2010). The current study focuses on analyzing the
impact of operational risk management on performance of banks. Positivism and
interpretivism are the common philosophies adopted by the researchers in order to
attain a well defined and effective business results. The former philosophy adopt rigid
scientific approach for the study which helps in attaining valid and reliable results on the
basis of scientific tools and analysis. The outcomes of these studies are commonly
universal applicability of which is common. Interpretivism philosophy on the other hand
demand involvement of social and behavioral aspects which are not constant for the
studies (Grafton, Lillis and Mahama, 2011). It indicates that impact of operational risk
management on performance of bank can be assessed with application of interpretivism
philosophy. So, present study adopts interpretivism philosophy because the outcomes
of the study has been attained by considering large number of secondary information
towards operational risk aspects. In such manner, researcher will collect interpret and
32

attain the research result for the study. Positivism approach has not been applied in the
present analysis as the outcomes of the study will be on the basis of in-depth analysis
of gathered information. Furthermore, the selected interpretivism philosophy is effective
where researcher consider multiple facet of single fact and accordingly own views can
be presented. Thus, it is effective for current study on impact of operational risk
management on performance of bank.
3.3 Research approach
This aspect of the study deals with effective and well defined aspect of analyzing
the data and attaining well defined result for the research issue. Inductive and deductive
are the common approaches adopted in the research analysis method. Deductive
approach is the one which use the method of data collection to attain effective and well
defined results for the research issue. This approach is a useful tool to consider social
and behavioral aspect for the research analysis (Guercini, 2014). Inductive research
approach on the other hand is a quantitative scientific approach where the analysis is
made on the basis of hypothesis testing. The present study focuses on attaining an
effective result regarding operational risk measures within the banking sector. The study
has adopted deductive method as the results will be attained on the basis of research
questions for which data collection will be done (Hill, 2007). This will create an effective
and well defined impact on analyzing the business issues and aspects related to
operational risks for the banks. Inductive research approach will not be applied in the
study as data availability on the stated topic will be challenging task. Hence, deductive
approach is effective for assessing effectiveness of operational risk management on
performance of bank wherein researcher at first focuses upon theoretical aspect and
then move towards specific one. Thus, it aids to develop deep understanding related to
topic and accordingly aim and objectives are fulfilled.
3.4 Research design
It is regarded as the blueprint of the study and highlights the effective ways with
the help of which aims and objectives of the research can be accomplished easily. This
aspect of research analysis focuses on analyzing the research design that will be
carried out by the researcher to attain effective and well defined results for the study.
33

There are various research designs adopted by instigators for different research issues.
The most common research design includes exploratory research, descriptive research,
case study analysis, scientific research, experimental research etc (Hogg, 2008). Every
design focuses on attaining different research approach for attaining the research issue.
Descriptive research focuses on developing the results on the basis of general theories
and prove the same within the overall analysis. Exploratory research on the other hand
focuses on evaluating the new concepts or seeking a new perspective of the study
(Hussain, 2011). The present study aims to determine the impact of operational risk
management on performance of banks. The descriptive analysis method has been
applied in the study as the research issue is common yet demands an in depth analysis
about the issues. However, qualitative type of investigation generally uses descriptive
research design for understanding the characteristics of population which is being
studied. This assisted researcher in preparing themes according to the secondary
information and presented the same effectively in order to achieve research aim and
objectives. Hence this will be effective for presenting the outcome of current study which
detail description of collected primary as well as secondary data.
3.5 Research type
The research type may be characterized as qualitative and quantitative research
which clearly helps the researcher in analyzing the research method and design of the
study. This is a well defined measure to structure the overall analysis and attain
effective and clear results for the issue. Qualitative type of researches are those which
demands both hard and soft aspects of analysis (Kothari, 2011). The behavioral aspect
individual perception and changing needs of the people are effectively taken into
consideration. Quantitative research on the other hand use the mathematical
approaches and measures to deal with the research problem. It adopts well defined
means of tools and techniques to attain accurate and clear results. The present study
has adopted qualitative approach as it focuses on attaining the results in an effective
manner (Lee, 2014). The qualitative aspects of the study will help in creating a clear and
significant picture for the current analysis. This research aspects created an effective
research approach and picture for the current issue within for the stated problem. The
34

rationale behind selection of qualitative type of investigation is in-depth analysis of
study. This is because topic demands for theoretical analysis through which research
adds innovative ideas and assumption for drawing valid outcome in the light of collected
information. Moreover, selection of qualitative data is appropriate because it provides
opportunities to research to describe the findings or results in an appropriate manner.
3.6 Data collection
This is another important part of researcher methodology which provides detail
overview related to collected data, Basically two types of data are collected in the
research such as primary and secondary. The former one is collected at first hand for
the specific purpose of research. It takes relatively extensive time for completing the
entire process of data collection from designing to analysis (Fiegen, 2010). On the other
hand, secondary information is collected from already available sources. Here, relatively
less time is consumed because researcher has variety of option from where information
is sorted in accordance with purpose of the study. There are number of sources for
collection of primary data such as interview, questionnaire and observation. Interview
method consumes more time because under this scholar ensure one to one interaction
with respondents. Owing to this, present study on impact of operational risk
management on performance of banks, questionnaire method has been applied for
collecting primary data. Furthermore, reason behind selecting, questionnaire is to save
the time and getting access to respondents in accordance with their convenience.
However, this is little inconvenient when time and cost constraint are available. In
the present research only secondary information has been collected and primary data
has not been obtained due to the nature of research (Grafton, Lillis and Mahama,
2011). Secondary data are collected from sources like journals, books and online
articles. Moreover, other sources for secondary information like annual reports, CSR
reports of banks and bank of England website are also accessed (Hussain, 2011). The
major reason behind conducting primary and secondary information is gain in-depth
knowledge of banking sector with regard to operational risk management. It is because
mere primary research might not be effective to extract valid outcome. Owing to this,
secondary information provides strong evidence for selected organization as well as
35

entire banking sector that how operational risks are affecting its performance.
Therefore, both primary and secondary kind of data are collected through which
researcher will come to know that how effective operational risk management is, for
improving performance of bank. Here, from secondary data in-depth understanding has
been developed and from primary data specific scenario of HSBC has been clarified.
3.7 Sampling approach
Sampling is the process of select small and representative proportion of
population which is being used in the study. It represent that individual unit or target
population on which study is being carried on. Probabilistic and non-probabilistic are two
kind sampling method applied in the field of research. Both of these technique consists
of number of approaches such as simple random, quota, judgment snowball and
purposive sampling. However, probabilistic framework is generally applied where
researcher does not give equal chance to all respondents to get select in the study
(Guercini, 2014). On the other hand, non-probabilistic sampling imparts equal chance to
get select in the study in order to provide valid information. Here, purposive sampling
has been applied in the study wherein researcher has main aim to extract information
related to impact of operational risk management on performance of entire bank named
HSBC. However, sample size also plays significant role wherein it is decided that how
much respondents can be selected to represent the entire population (Hussain, 2011).
Though, population of study is entire workforce employed in operation department of
HSBC. 10 respondents are selected from the population who will provide detail
information related to operation of corporation and use of different operational
management practices for smooth operation of bank. The major reason behind
selecting purposive sampling is to gather appropriate data from experienced workforce
who are directly engage with operation of HSBC. This facilitates to achieve the aim of
study on the basis of valid or reliable information.
3.8 Data analysis
Data analysis is another most important part of research methodology which play
active role in presenting the outcome. There are two types of techniques used for
analysis of collected information such as qualitative and quantitative. The quantitative
36

kind of techniques make use of correlation, regression and other related statistical test.
This has basic aim of the assess the significant impact of one variable on one or more.
On the other hand, qualitative type of investigation uses thematic analysis wherein in-
depth analysis is done for collected information (Kothari, 2011). Here, researcher make
themes in accordance with primary and secondary data which are then represent the
help of diagram or frequency table. It shows that, thematic analysis has been applied in
the current study under which research presented all of collected information in very
effective manner. It will also serve as the descriptive analysis so that collected primary
and secondary information can be analyzed in an effectual manner. Apart from this,
each theme is backed by collected information for producing valid outcome of study.
However, use of descriptive analysis facilitates to describe the collected secondary
information that how effective operational management tools are, which are generally
applied by HSBC bank to mitigate the risk. Apart from this, thematic analysis has been
done with clear description of each covered themes in the light of aim and objectives of
study (Grafton, Lillis and Mahama, 2011). Therefore, in-depth analysis has been done
with the help of application of thematic analysis for giving detail description of all
collected secondary data. However, this method has been selected as it facilitates for
detail analysis of collected information in the light of research aim and objectives.
Moreover, secondary analysis consists of number of themes which are prepared from
literature review. Owing to this, number of themes are increased from the objectives,
through which researcher has presented all collected information effectively.
3.9 Ethical consideration
Ethical aspect is very important as no any study can be completed without
application of ethical norms. It assists researcher in completing the entire study
effectively for the purpose of meeting research aim and objectives. The main reason
behind consideration ethical norms is to promote the aim of research under which
researcher acknowledges truth and put efforts to avoid any kind of errors. In the current
research on impact of operational risk management on performance of bank,
carefulness has been ensured by avoiding negligence and careless errors (David and
Resnik, 2016). Furthermore, good record has been kept related to research activities
37

such as research design, data collection and journals. The main reason behind the
same is dependency of the study on secondary data so careful and critical examination
of peer as well as own work has also be done. Moreover, current research also has the
ethical aspect as “honesty” which shows that not any kind of collected information has
been misrepresented and publication of results is ensured in proper manner.
However, the research is done to build public support so that corporations which
are suffering from the same kind of issues can also apply the strategies explained in the
same. For this purpose, ethical norms strive to promote social good and mitigate any
kind of social harm which might cause during public education, research and advocacy.
Apart form this, ethics is the most important aspect in research where researcher must
focus upon different facet of the same. It enhances reliability and validity of collected
data in the study and accordingly suggestions given in the study can be applied at
workplace of bank. By focusing upon ethical consideration it has been ensured that all
participants included in the study were not forced to take part. However, purpose of
research also made clear to them and their willingfull associated has been determined.
At the same time, no any information has been taken from the available sources,
instead it has been sorted out in the light of research aim and objectives by citing the
same properly (Hogg, 2008). Thus, ethical norms are maintained by researcher by
taking into account all ethical aspect. Furthermore, prior permission was taken from
some of the locked sources of data in order to ensure ethical compliance. Moreover,
study bring the same kind of output as studied by other scholars. In addition to this, all
information of respondents has been saved with confidentiality. This proves to be
effective to secure their right as not any third party will ever provide the access to the
same. Apart from this, no any respondents is forced to provide personal detail infect any
of their personal information will be finished after completion of the study (Lee, 2014).
Therefore, no any unethical practices are done while completing the report and list of
references has also been provided to provide evidence for collected information.
3.10 Conclusion
According to the above mentioned methodology, it can be concluded that
qualitative type of research investigation is helpful for drawing valid outcome of the
38

study. It is effective for researcher to collect large amount of primary and secondary
information through which valid outcome can be drawn for the collected information.
Apart from this, descriptive research design has been selected through which overall
results and outcome of study are presented in an effectual manner. It can also be
concluded that selection of purposive sampling aid to select appropriate respondents
from HSBC bank for achieving the aim of the study on right time. Moreover, descriptive
or thematic analysis facilitates to analyze the collected primary and secondary
information in more depth.
39

CHAPTER 4: DATA DESCRIPTION
4.1 Introduction
Data description is the another most important chapter of dissertation which
consists of detail information related to responses given by participants. It facilitates to
produce valid output for reaching at the aim of the study. Furthermore, entire part of
data description is prepared in accordance with questionnaire prepared for the study.
However, combination of both primary and secondary data is ensured in order to
produce valid outcome. Apart from this, data collection procedure has been completed
by using online survey. In this regard, questionnaire has been sent through mail and
along with that difficulties are also recognized through which fruitful outcome is drawn.
The main purpose behind selecting online survey is to save entire time as well as cost.
4.2 Research limitation
The research limitations are mostly associated with any study because of time
and cost constraint. The present study is based upon both primary and secondary data
hence limitation related to lack of reliable data was faced. However, researcher
accessed number of sources for secondary information but issues is faced due to
restricted access of many of sites. However, this issues has been resolved to a great
extent by taking prior permission for the same. Still, it might be possible that some of
information left from the study. Further, lack of prior research is also another issues
which limit the data collection procedure. It is because if same kind of researches are
already done then scholar can get help in collecting large amount of data in the light of
current research aim and objectives (Research guides, 2016).
Furthermore, longitudinal effect is also the limitation of current study. This is
because it is based on secondary information and specific bank as HSBC. It required
extensive time to conduct literature review and accordingly analyze the collected
information. Owing to this, time constraint might have affected data analysis part.
However, majority of the important information has been incorporated for achieving
research aim and objectives. In addition to this, cultural and other type bias is also
another research limitation which affect study to a great extent. Generally bias is
referred in negative manner but it can be positive also. Here, positive bias might be
40

ensured by research through reflections of reliance on research which only support
hypothesis or research aim an objectives. Owing to this, proof reading was done the the
study so that accordingly any kind of omission and bias can be detected. However,
through proof reading and use of appropriate information objectives of study are
achieved in an effectual manner.
In addition to this, primary data are also collected and accordingly limitations can
be seen in term of lack of enough time and cost. For this purpose researcher used
online survey method so that respondents feel comfortable to gather large amount
information. Apart from this, it might be not possible that all respondents provide data on
right time. Owing to this, purpose of research was made clear to respondents and then
data collection procedures was proceed. Therefore, ethical procedure was completed
in achieving aim and objectives of study on right time.
4.3 Problem suggestions
At the time of collecting primary and secondary information, many of the research
limitations were faced by researcher. This issue was resolved by using effective tool or
technique to analyze the collected information. Furthermore, purposive sampling has
been selected just to collect relevant information in the light of research aim and
objectives. Apart from this, online survey method has been selected on right time so
that respondents can fill the same as per their convenience.
Name____________________
Gender:
Respondents Gender: Frequency
7 Male 70%
3 Female 30%
41

Age:
Respondents Age Frequency
4 18-30 Years 40%
3 31-40 Years 30%
1 41-50 Years 10%
2 50 and above 20%
Theme 1 :Operational risk occurs to HSBC because of failed international
process, poor system and external events
Respondent
s
1. In your opinion
why operational risk
occur to HSBC? Frequency
3
Failed internal
process 30%
1 Poor system 10%
1 External events 10%
1 People 10%
4 All of the above 40%
42
70%
30%
Male
Female
Illustration 5: Gender

Theme 2: Operational risk management tools are helpful to maintain good
performance of HSBC
Number of
participant
s
2. Do you think that operational
risk management tools are
helpful to maintain good
performance of HSBC? Frequency
7 Yes 70%
2 No 20%
1 Can't say 10%
43
30%
10%
10% 10%
40%
Failed internal
process
Poor system
External events
People
All of the above
Illustration 6: Reasons for operational risk

Theme 3: HSBC is facing issue related to employment practices and workplace
safety
Participant
s
3 . Do you agree that HSBC is
facing issue related to
employment practices and
workplace safety? Frequency
1 Strongly agree 10%
3 Agree 30%
1 Neutral 10%
50 Disagree 50%
0 Strongly disagree 0%
44
70%
20%
10%
Yes
No
Can't say
Illustration 7: Effectiveness of operational risk management
tools

Theme 4: HSBC applies effective operational risk management practices
Responde
nts
4. HSBC applies effective
operational risk management
practices? Frequency
6 Strongly agree 60%
2 Agree 20%
1 Neutral 10%
1 Disagree 10%
0 Strongly disagree 0%
Theme 5: Different measures to manage the operational risk management in
HSBC
Responde 5. What are the different Frequency
45
10%
30%
10%
50%
Strongly agree
Agree
Neutral
Disagree
Strongly disagree
Illustration 8: Employement practices and workplace
safety
60% 20%
10%
10%
Strongly agree
Agree
Neutral
Disagree
Strongly disagree
Illustration 9: Operational risk management practices

nts
measures to manage the
operational risk management in
HSBC?
2
Acceptable level of internal
control 20%
2 Centralized database 20%
1 Timely risk management meeting 10%
5 All of the above 50%
Theme 6: Almost always operational risk is affecting performance of the HSBC
Respondents
6.In your opinion to what extent
operational risk are affecting
performance of the HSBC? Frequency
5 Almost always 50%
3 Usually 30.00%
2 Often 20%
0 Sometimes 0%\
46
20%
20%
10%
50%
Acceptable level of
internal control
Centralized database
Timely risk
management meeting
All of the above
Illustration 10: Methods to measure operational risk management

Theme 7: Operational risk management of HSBC support workforce in
maintaining good performance
Respondent
s
7. Do you think that operational
risk management of HSBC
support workforce in
maintaining good
performance? Frequency
8 Yes 80%
1 No 10%
1 Can't say 10%
47
Almost always
Usually
Often
Sometimes
0
0.1
0.2
0.3
0.4
0.5
0.6
50%
30%
20%
0%
Illustration 11: Impact of operational risk on
performance of HSBC

Theme 8: Insurance and other related methods are considered utmost for
mitigation of risk in HSBC
Responde
nts
8.Which method is considered at
most for mitigation of risk in
HSBC? Frequency
3 Insurance 30%
2 Portfolios diversification 20%
2 Hedging 20%
3 All of the above 30%
48
80%
10%
10%
Yes
No
Can't say
Illustration 12: Impact of operational risk management on
performance of workforce
30%
20% 20%
30% Insurance
Portfolios
diversification
Hedging
All of the
above
Illustration 13: Risk mitigation factors

Theme 9: Basel regulation and its compliance help HSBC is effective
management of operational risk
Responde
nts
9. Basel regulation and its
compliance help HSBC is
effective management of
operational risk? Frequency
5 Highly satisfied 50%
2 Satisfied 20%
1 Neutral 10%
1 Dissatisfied 10%
1 Highly dissatisfied 10%
Theme 10: There are different methods for reducing operational risk of HSBC
Responde
nts
10 . What are the effective
method for reducing operational
risk of HSBC? Frequency
2
Compliance of regulatory
framework 20%
2 Strong risk culture 20%
1 Skilled workforce 10%
5 All of the above 50%
49
50%
20%
10%
10%
10% Highly
satisfied
Satisfied
Neutral
Dissatisfied
Highly
dissatisfied
Illustration 14: Impact of basel regulation
on operational risk

Theme 11: Current operational risk framework assist HSBC in operational risk
management
Responde
nts
11. Current operational risk
framework assist HSBC in
operational risk management? Frequency
4 Highly satisfied 40%
3 Satisfied 30%
1 Neutral 10%
0 Dissatisfied 0%
2 Highly dissatisfied 20%
50
20%
20%
10%
50%
Compliance of
regulatory
framework
Strong risk
culture
Skilled workforce
All of the above
Illustration 15: Methods to reduce operational risk

4.4 Conclusion
The chapter of data description reflects that HSBC is having issue related to
money laundering and KYC. It can also be concluded that company is using effective
strategies for resolving operational issues. In this regard, centralized data recording and
inclusion of skilled as well as competent workforce prove to be effective for catering
requirement of business in an effectual manner. It can also be summarized that failed
internal process, poor system and other external events are affecting business
performance by increasing operational risk. Apart from this, HSBC is also facing issue
related employment practices and workplace safety. This kind of scenario demotivate
workforce and they cannot find it easy to focus upon work. Owing to this, operational
risk management are helpful for attainment of business objectives effectively.
51
40%
30%
10%
20% Highly satisfied
Satisfied
Neutral
Dissatisfied
Highly
dissatisfied
Illustration 16: Current operational risk
framework analysis

CHAPTER 5: DATA ANALYSIS
5.1 Introduction
Data analysis is the most important chapter of dissertation which consists of
detail analysis of collected information. This part lays emphasis on revealing of the
main findings and accordingly analysis has been done. Here, the findings of study are
then interpreted for bringing valid outcome. Furthermore, present research on impact of
operational risk management on performance of HSBC bank, thematic analysis has
been used. Under this, different themes are prepared and accordingly analysis has
done. For this purpose, qualitative analysis is applied through which aim of the research
can be achieved in stipulated time span. Thus, analysis part has been completed by
taking into account both collected primary and secondary information.
5.2 Thematic analysis
Thematic analysis refers to analyzing and interpreting the collected information in
accordance with research aim and objectives. However, data analysis has been done
on the basis of both primary and secondary data which are collected by researcher in
the study. Accordingly, interpretation has been done through which fruitful outcome can
be drawn.
5.3 Analysis of primary data
Theme 1 :Operational risk occurs to HSBC because of failed internal process,
poor system and external events
The collected information from primary data reflects that 30% respondents stated
that failed internal process is the crucial issues through which operation risk occurred in
HSBC. On the other hand, 10% respondents said that poor system is the major reason
behind operation risk in organization whereas 10% participants said that operational risk
take place due to external events. However, 10% respondents stated that company is
facing through operation risk because of less skilled and poor workforce. Apart from
this, majority of respondents (40%) stated that all of the mentioned factors are the
reason of operation risk in the organization.
The collected information is consistent with secondary data that operation risk
occur in the organization because of poor security, failed internal process and less
52

skilled workforce (Mols, 2013). Not only this, but it has also been evident in secondary
information that external events are also increasing the operational risk of HSBC.
Theme 2: Operational risk management tools are helpful to maintain good
performance of HSBC
The collected information bring forth outcome that 70% participants working in
HSBC stated that operational risk management tools are helpful to maintain good
performance of HSBC. However, 20% participants do not agree upon the same
because of some specific exception. Remaining 10% respondent do not have idea
regarding the same.
The secondary data also reveal the same outcome that operation risk
management tend to reduce overall risk associated with operation of bank (Embrechts,
and Hofert, 2014). Accordingly organization follow the regulatory framework and internal
control system is improved for better performance of bank.
Theme 3: HSBC is facing issue related to employment practices and workplace
safety
The outcome observation from primary information reflects that 50% respondents
disagree that HSBC is facing issue related to employment practices and workplace
safety. Furthermore, 30% respondents agree that HSBC has issue related to
employment and workplace safety. However, 10% participants neither agree not
disagree with the same but 10% respondents stated that ineffective workforce practices
tend to affect entire operation of business.
The same information has been extracted from secondary information that HSBC
is having issue related to poor management of workforce and workplace safety
(Alderman and Yemtsov, 2013). This is the reason behind unethical practices like tax
evasion, money laundering issues etc .
Theme 4: HSBC applies effective operational risk management practices
According to the collection of primary data, it has been found that, 60%
respondents strongly agree that HSBC applies effective operation risk management
practices. Similarly, 20% respondents also agree with the same but 10% remain neutral.
53

Furthermore, remaining 10% respondents do not agree upon the same that corporation
applied operation risk management practices effectively.
On the other hand, secondary information also shed light on application of
effective operation risk management for better performance of company. It facilitates to
meet expectations of all associated stakeholders and create goodwill of bank in the
marketplace (Fiordelisi, Soana and Schwizer, 2014).
Theme 5: Different measures to manage the operational risk management in
HSBC
According to the gathered data, 20% respondents stated that acceptable level of
internal control is the effective measure to manage operation risk whereas 20%
respondents reflects that centralized data base is the foremost way to reducing
operation risk at workplace. Furthermore, 10% respondents stated that timely risk
management meeting plays important role in mitigating risk to a great extent.
On the other hand, little gap can be observed from the collected information
because here focus has been laid on communication, centralized database etc.
However, secondary information also shows the same output that internal control
processes and effective communication facilitates to manage the operational risk
effectively.
Theme 6: Almost always operational risk is affecting performance of the HSBC
The information collected from primary data shows that 50% participants stated
that operational risk almost always affect performance of HSBC whereas 30%
respondents stated that same thing that it affect performance of company usually. On
the other hand, 20% respondents said that it often affect performance of company.
The information gathered from primary data is consistent with secondary one
where it has been found that operational affect entire performance of company. It will
have profitability, credit rating, efficiency as well as brand image of banks. Hence,
majority of participants stated that operational risk is directly associated with HSBC and
accordingly overall operational efficiency of corporation get affected.
Theme 7: Operational risk management of HSBC support workforce in
maintaining good performance
54

According to outcome of primary data, it has been found that 80% respondents
stated that operation risk management of HSBC support workplace I maintaining good
performance. On the other hand, 10% do not agree on the same whereas remaining
10% do not have any idea about it. However, majority of respondents thinks that
implementation of effective practices for management of operation risk is the key aspect
for ensuring good performance of business.
On the other part, secondary data have also shown the same outcome that
operation risk management facilitates to improve performance of bank to a great extent.
By using practices or strategies of operational risk management, business tend to focus
upon good quality of services, strong risk culture and higher customer satisfaction .
Thus, collected data are consistent and bring forth the same outcome that performance
of banks can be improved by using effective operational risk management practices.
Theme 8: Insurance and other related methods are considered utmost for
mitigation of risk in HSBC
According to the collected information, it has been found that 30% respondents
stated that insurance is considered as the most effective aspect to mitigate the entire
risk associated with HSBC. On the other hand, 20% respondents said that
organizational can easily mitigate its entire risk by using portfolios diversification. In
addition to this, 20% workforce of HSBC said that hedging is the effective aspect for risk
mitigation through which corporation can reduce the entire risk to significant level. In
addition to this, remaining 30% participants stated that all of the stated methods such as
insurance, portfolios diversification and hedging are helpful for reducing operation risk of
corporation to a great extent.
Furthermore, secondary data also reveals the same outcome that, insurance,
hedging and portfolios diversification contribute towards reducing operation risk
associated with bank to a great extent. It is helpful for company to ensure ethical
conduct of business and increase overall rate of return. Furthermore, other related
banks like Standard Chartered and Duetsche banks are also mitigating their risk by
using portfolio diversification and hedging strategies (Operational Risk, 2015).
55

Theme 9: Basel regulation and its compliance help HSBC is effective
management of operational risk
According to the collected information, it has been found that majority of
respondents such as 50% are highly satisfied that Basel regulation and its compliance
is effective for HSBC through which operation risk can be managed effectively. On the
other hand, 20% participants are satisfied with the same and stated that Basel
regulation proves to be effective for internal control and risk mitigation in company to a
great extent. Apart from this, 10% respondents are neither satisfied nor dissatisfied with
the same whereas 10% are dissatisfied and stated that operational risk occur due to
many reasons where Basel regulation is not the only solution. Apart from this, remaining
10% participant are highly dissatisfied that Basel regulation and its compliance
facilitates to manage operational risk.
The secondary information has also shown that Basel regulation are important
for banking sector because its compliance facilitates HSBC in effective operation
management. It has been shown in secondary information that high quality of liquid
assets should be kept in order to reduce operational risk or face any kind of contingency
situations . Other banks like Citigroup are also following advanced approach of reporting
mentioned in Basel three for reducing operational risk.
Theme 10: There are different methods for reducing operational risk of HSBC
The information collected from primary data reflects that compliance of regulatory
framework is the effective method for reducing operation risk of HSBC. Here, 20%
participants do agree with the same but other 20% respondents stated that strong risk
culture of HSBC can be helpful for reducing such kind of risk to a great extent.
Furthermore, 10% workforce stated that skilled employees are helpful for company
because they ensure compliance of regulatory framework. Apart from this, majority of
respondents (50%) stated that compliance of regulatory framework, skilled workforce
and strong risk culture play important role for reducing operation risk of HSBC.
Therefore, operation is reduced by using several kind of methods in HSBC through
which integrated approach can be applied by corporation.
56

The information collected from secondary data also shows that same output that
strong risk culture is important for any organization. However, at the same time,
employees should be skilled and competent who can achieve the set targets of
corporation within specified time span.
Theme 11: Current operational risk framework assist HSBC in operational risk
management
According to the collected primary information, it has been found that, 40%
respondents are highly satisfied with current operation risk management framework.
30% participants are satisfied with the same but 10% participant are neither satisfied
nor dissatisfied with the same. Furthermore, 20% respondents are highly satisfied and
stated that current operation risk framework is effective. It is showing that business can
cope up with integrated approach for effective management of different kind of risk.
The secondary information also bring forth the same output that operational risk
management framework plays significant role in management of operational risk. This
proves to be effective for smooth flow of production activities and cater need of different
kind of stakeholders who are associated with business (International Finance
Corporation, 2016). Thus, consistency can be observed from both primary and
secondary information and accordingly it has been found that operation risk framework
is directly associated with operational risk management.
5.4 Analysis from secondary data
Theme 1: Internal external fraud are the important operational risk factors
According to the collected information, it has been found that internal and
external frauds are the important operational risk factors which affect performance of
corporations like HSBC. Here, the internal fraud is done in the form of mis-
representation of assets, bribes and theft which affect operation activities of business to
a great extent. Under this, bank insiders might collude with external fraudsters through
internal data process can be accessed. For this purpose, it is tried to hire one employee
in the corporation who can track overall the transaction and accordingly he can easily
lend money to outside party. In the same manner, account takeover is also the common
type of internal fraud wherein workforce are involved in the collusion with outsiders
57

(Fiordelisi, Soana and Schwizer, 2014). In this regard, employees working in bank
contact to customers and open their bank account just for the sake of withdrawing
money.
However, they might plan to sell PIN and other related detail of customers to
outside parties for the purpose of making higher profit (SHAH, 2013). Apart from this,
external fraud take place just because of inefficient operation of entire organization. This
take place because of lack of security and poor skilled workforce who are unable to
perform their duties in very well manner. Furthermore, theft by consumers or financial
agents as well as misrepresentation of financial information is considered as the
foremost aspect. Moreover, misappropriate properly comes the crucial aspect of
business operation (Biell and Muller, 2013.). In this regard, sensitive information are
required to store with security. This will be effective for HSBC to reduce operation risk to
a great extent and meet expectations of clients in an effectual manner.
Theme 2: Employment practices and workplace safety are competent of
operational risk management
The collected secondary information reflects that employment practices and
workplace safety are competent for operational risk management. Every organization
must have highly skilled and competent workforce who put efforts in the direction of
achievement of long as well as short term objectives of bank. It facilitates business to
carry out all daily transaction effectively without affecting operation performance of
company in any manner. Furthermore, workplace safety is also considered as the most
important activity under which IT department of HSBC handle or take responsibility
related to security. Without, ineffective employment practices an organization might
increase the chance of internal or external fraud. Owing to this, recently HSBC is being
investigated by US securities and Exchange Commission with regard to its hiring
practices in Asia.
The main reason behind conducting such kind of investigation is to ensure that
banks are hiring competent and skilled workforce for the corporation. It is also observed
that no any relatives or friends are being hired on higher position. In addition to this,
workplace safety is mandatory through banks ensure smooth operation. Moreover, non-
58

compliance to health-and-safety regulations tend to increase operation risk of entire
bank (Pedersen, Nielsen and Kines, 2012). It is because workforce might not be able to
work properly due to lack of supportive environment. In addition to this, unethical
termination criteria and presence of discrimination at workplace affect operation of
HSBC. This does not only increases operational risk but also affect financial
performance of bank due to bad image. At this juncture, management of HSBC lays
emphasis well deserved compensation as well as benefits for workforce and accordingly
retain them for longer time span. Furthermore, other organizations like Royal bank of
Scotland and Standard Chartered bank are hiring competent workforce for managing
operational risk (Standard Chartered, 2016).
Theme 3:Damage to physical assets of bank is the critical situation for entire
corporation
The collected secondary information reflects that damage to physical assets of
bank is the critical situation for entire corporation. It is because many of data are lost
and management face issues in rendering services to end users. It has been found that
damage to physical assists might caused by natural disasters or parties working
internally or any third party. At this juncture, natural disaster affect the operation of firm
by destroying overall internal system and affect productivity to a great extent. This is
because earthquake, heavy rainfall etc affect operational activities by damaging
physical assets. For this purpose, HSBC bank must be backed by risk assessment plan
through which company can ensure its continual operation. Now a days, rapid and
unexpected changes in natural condition is affecting corporations. It can be critically
evaluated that organizations with poor back plans get affected to a great extent.
Furthermore, natural of disaster also create issue in recovery process because
every physical assets might get affected during that period. Not only this but other kind
of damages like terrorism and vandalism contribute towards higher operation risk.
Under this, people use different kind of software like Logic bomb, trap doors and login
spoofing (Bátiz‐Lazo and Wood, 2013). Along with that, trojan horses is also included
which is a program works very well but people use the same for stealing passwords and
destroying the programs from hard disk. Accordingly internal fraud is done so that they
59

can easily damage the physical assets of corporation in future time span. In the same
manner, outsider attack take place because of connectivity of computer system with
insecure internet. This tends to make system more vulnerable and accordingly physical
assets are damaged through outsider attack. Moreover, bank's operation activities get
affected because of virus. This is generally happened because of lack of sufficient
information from the part of workforce through which they do not take proper care while
downloading any documents (Sturm, 2013). Therefore, number of reasons are there for
physical assets of bank like HSBC which affect operational activities of the same.
Theme 4: Operational risk management is the greatest tool for successful
operation of bank
The collected information reflects that operational risk management is the
greatest tool for successful operation of bank. This is because several kind of
operational risk are highlighted by the department through which appropriate actions are
taken on right time. At this juncture, management of HSBC formulate effective
strategies with inclusion of highly competent workforce who work upon successful
execution of formulated plans and procedures. Similarly, compliance of regulatory
framework is also ensured which serve as the basis of effective data recording. Not only
this, proper auditing and other related aspect are implemented by focusing upon major
issues. For example, issues; money laundering, know-your-customers (KYC) and other
tax evasion of HSBC can resolved with implementation of right kind of practices (Chen
and Cheng, 2013). However, other competitors of bank like National Australia bank and
Royal bank of Scotland are implementing effective operation management practices
(Paradi and Zhu, 2013).
This will be helpful for business to operate successful at global marketplace. Not
only this, but goodwill of company will be increased, if such kind of issues will not take
place (Michalski, 2013). HSBC is already suffering from number of issues through which
other innocent parties such as clients, customers and employees might be affected. For
this purpose, management implement operational risk management practices so that
tax can be paid on right time and all consumers who are getting services of HSBC can
be guided to pay tax on right time. However, they should not be allowed for illegal tax
60

saving because it seems unethical. Furthermore, banks uses number of strategies with
inclusion of right kind of personnel who provide guidelines to buyers for payment of tax
on right time. Moreover, automated system is implemented at workplace so that
accordingly clients can maintain the ethical aspect of business. In addition to this, time
to time training is provided among workforce so that strong risk culture is developed in
company. With the implementation of such kind of culture, business integrate all its
operational activities and thereby long as well as short term objectives are achieved
(Uzkurt and et.al., 2013).
Theme 5: Elimination/avoiding and transfer are effective ways to conduct risk
management
The collected information reflects that avoidance/elimination and transfer are
effective ways to conduct operational risk management. Under this, HSBC uses
portfolio diversification under which operational risk is reduced to a great extent.
However, some of the risk are avoided which are not too much important for entire
company so that accordingly uncertainty can be perceived. However, for diversifying
risk portfolio is created by bank in order to mitigate financial risk. For this purpose,
different profitable sectors are taken into account and then investment is made. The
major benefit of elimination is that company might get loss in one sector but other sector
will surely get profitability (Anginer, Demirguc-Kunt and Zhu, 2014). This proves to be
effective for meeting expectations of different stakeholders. It is because worst situation
of business will not occur because of perfect mitigation plan under which management
tend to focus upon reducing operational risk to moderate level.
It has also been found that, compliance of regulatory framework is more
important where management incorporate highly skilled workforce who carry out internal
audit. With the help of audit outcome firm extract important data with regard to potential
risk and accordingly investment decision are taken. In such manner, many of the risk
are eliminated at very beginning.
Furthermore, some of the important practices such as bank policies, process
control and due diligence are important tools through which management of corporation
assess the entire risk (Shim, 2013). Such kind of procedures contribute towards
61

smooth operation of business because certainty is ensured with better management of
all related operational activities. It is well known fact that financially sound bank can
easily track over other risk factors. It can be critically evaluated, that some time HSBC
prefer to transfer risk, if it has good position in the marketplace. This will be helpful to
ensure secured future with higher rate of return and good image in the marketplace.
Theme 6: Basel regulations is the effective form of operational risk management
According to the collection of data, it has been found that Basel regulations are
important for operation risk management. Under this, HSBC follows the specific laws
imposed by Basel; international regulatory framework for banks. The current Basel III
shed light on improving ability of bank to absorb shocks which generally arise because
of economic or financial stress. According to policies of Basel, HSBC need to follow the
capital requirement and accordingly 4.5% of risk weighted assets are required to hold
by the same in the form of own equity. It will play significant role in reducing the agency
problem. On the other hand, new regulations of Basel III shows that HSBC can keep
highly quality liquid assets for meeting its short term obligation in case of emergency.
Accordingly, other competitors of HSBC like Citigroup, BNP Paribas are complying
regulatory framework and accordingly effective internal control procedure are
established in corporation. Here, Citigroup is following the advanced approach reporting
set by Basel with estimate of increasing in risk weighted assets.
Moreover, as per the regulations mentioned in Basel III bank can increase its
stability in balance sheet by reducing leverage ratio. However, at the same time, capital
requirement can be imposed (Citi, 2016). However, during normal economic situation
business can keep high leverage for the purpose of increasing rate of return. It can be
critically evaluated that, high leverage ratio might be the reason of financial crisis of
bank during rise in price. Therefore, Basel III depicts that minimum leverage ratio should
be maintained by bank for reducing operational risk but with assurance of double high
quality assets. Hence, regulations of Basel III shows that corporations with high
leverage ratio must be regulated properly instead of self regulation. It is because
management cannot handle such kind of situations and in result it affect entire operation
of the same to a great extent (King, 2013). Therefore, banks require to operate with
62

effective operational strategies for certainty in future. It facilitates of create competitive
edge in the marketplace with solvency.
5.5 Conclusion
According to the analysis part, it has been found that, Basel regulations are
important for better management of business under which corporation focuses upon
complying regulatory framework. This aspect proves to be effective for smooth
operation of business. However, by using Basel regulation company can effectively
credit and crisis which occurred to bank can be minimized to zero level. It can also be
concluded that damage to physical assets is the potential operational risk that require
back of data in proper manner. Moreover, elimination, avoidance, and transfer are used
for risk management plan. In addition to this, operational risk usually occurs at
workplace so efforts are put to manage the same effectively.
63

CHAPTER 6: CONCLUSION AND RECOMMENDATION
6.1 Conclusion
The aforementioned report concludes that operational risk management plays
significant role in the growth of corporation. It supports corporation to ensure long run
success with increased rate of return. The analysis chapter bring forth outcome that
HSBC put efforts to reduce overall operational risk associated with bank. This aspect
tend to support all stakeholders of company by offering them right kind of information
related to entire operation of business. The first objective “To understand the concept
of operational risk management in banking sector” has been achieved with
collection of both primary and secondary information. According to the primary
information it has been found that operational risk management is ensured by taking
undertaking number of methods such as insurance, portfolio diversification and hedging.
All of these methods contribute towards appropriate management of operational risk.
Here, it has been observed that HSBC uses measures like acceptable level of internal
control, centralized data and timely risk management team. However, almost always
operational risk affect entire performance of HSBC and in the same manner other banks
are also getting affected due to poor management of operational risk. In addition to this,
analysis part also shows that inclusion of good risk management policies, workforce of
HSBC get support in maintaining good performance. It aids to create competitive edge
of the business with increased rate of return.
The secondary information reflected that issues related to money laundering,
KYC are taking place in HSBC due to poor operational risk management. However,
other competitors of company like National Australia, Royal bank of Scotland are
implement effective operation management practices. This facilitate to mitigate
operational risk to a great extent and support business in increasing overall rate of
return. The consistency has been shown in both primary and secondary results and
found that strong risk culture, compliance of regulatory framework and skilled workforce
are helpful measures in mitigation of operation risk. This motivates workforce and they
start following the set procedures and accordingly risk associated with business is
reduced to a significant level.
64

The second objectives of dissertation “To assess different types of operational
risk associated with HSBC bank of UK” has been achieved with in-depth analysis and
collection of primary and secondary data. It was revealed that, internal and external
fraud are affecting operational performance of bank . This is because people working in
company might conduct fraudulent activities due to support from external parties. They
might open fake accounts and accordingly withdraw money from banks for longer time
span. It has been found from secondary information that account takeovers and
collusion with outsiders are creating greater risk for banks in current era. Furthermore,
employment practices and workplace safety are also the factors associated with
operational risk. It shows that poor workforce management and safety, chances of
higher risk increases. At this juncture, unethical termination criteria and discrimination at
workplace are some of the potential factors affecting organizational performance badly.
This is because less motivated workforce can never support their clients, organization
or employers. The same outcome has been drawn from primary and secondary
information that, employment practices and workplace safety are important for business
through which corporation can apply integrated approach.
It has also been identified that damage to physical assets of bank is the most
critical situation for entire corporation. It is because such kind of situation affect overall
operation of business by spoiling the important data. However, physical assets get
affected due to natural disaster, earthquake and heavy rainfall. This circumstances raise
demand for higher security and back of important information related to clients,
accounts and other related details. Owing to this, physical assets must be carried with
proper record keeping which will be effective for business.
In addition to this, third objective “To identify the regulations associated with
managing operational risk in HSBC bank of UK” has been achieved with collection of
both primary and secondary information. Here, it can be concluded from primary data
that current operational risk framework of HSBC play important role in mitigation of
some of operational risk. At this juncture, Basel regulations are imposed by responsible
authority in order to manage the contingency situations of companies. At this juncture,
capital requirement of businesses are set in advance and in the same manner
65

management of businesses face the critical situations of businesses effectively.
Furthermore, Basel III shows that HSBC follow the policies related to keeping higher
liquid assets. In the same manner, financial statements are prepared in accordance with
IFRS and GAAP for meeting expectations of different stakeholders. It has been
concluded from secondary information that minimum leverage ratio is helpful for bank to
maintain stability. It can be critically evaluated that, high liquid assets must be there with
minimum leverage ratio otherwise banks with high leverage ratios are regulated.
6.2 Recommendation
According to the collected information, the last objective related “To recommend
different ways for reducing operational risk in HSBC bank of UK” is achieved in
following manner. This will be helpful for business to mitigate the risk and carry out all
operational activities in smooth manner. Furthermore, staff working in operation
department must have idea regarding potential issues which are taking place in daily
transaction. Hence, following suggestions will be helpful to manage the issue related to
operational issues to a great extent-
 Internal control system should be strong enough for meeting operational risk
related to business. This will be effective for business because internal fraud will
be controlled to a great extent. Here, strict policies will be prepared for workforce
who are taking part in fraudulent activities.
 Employment practices can be at place with inclusion of skilled and competent
workforce. It will be effective for HSBC to resolve issues related to workplace
because employees will get higher level of motivation. However, discrimination
should not be there at workplace and employees must be motivated with
 Account department of bank should focus upon preparing financial statements
effectively through which stakeholders requirement will be met. For this purpose,
publication of financial statements should be done in an appropriate which aid to
ensure well being of corporation in the marketplace.
 IT department of HSBC should be skilled and competent enough accordingly
company can easily cope up with changing scenario. For example, back plan will
be generated and related information will be saved with proper security.
66

 Money laundering and KYC related issues of business can be resolved by
assigned particular team. This will be effective to look into the matter and
accordingly all related issues will be managed effectively.
 Internals process should be checked with inclusion of highly competent
workforce and management team must be goal oriented. At this juncture, clear
flow of communication can be ensured in team through which employees may be
motivated. For this purpose, audit activities can be carried for assessing entire
performance of business in specific time span. It proves to be effective for
delivering good quality of services to end users.
 Operational risk framework can be updated on time to time in accordance with
occurred incidents or contingency. It will be effective for business to allocate
resources and responsibilities among team members associated in operation risk
management.
 Centralized data system should be there in company through which management
can easily access all daily transaction. This will be effective in detecting any kind
of fraud taking at workplace. Moreover, weekly or monthly meeting should be
taken with operation department where issues which are being faced by them will
be discussed. This proves to be effective in managing the potential issues and
improve entire performance of company in an effectual manner.
 Regulations imposed by government or other related authorities should be taken
into account by bank for ethical consideration. Furthermore, suggestions related
to maintaining liquidity and capital should be followed to face any kind of
contingency.
6.3 Recommendation for further research
The entire study was based upon operational risk management that how it is
helpful to improve performance of bank. However, specific aspect could be taken to
conduct the entire study in structured manner. In this regard, specific tool like impact of
forensic audit in detecting fraud in banking sector of UK can also be carried out.
Furthermore, the present study can be improved by focusing upon quantitative analysis
under which statistical tools can be applied. It will be effective for assessing the
67

effectiveness of operational risk management on performance of HSBC bank. However,
researcher could select only primary data for assessing effectiveness of different
operational management aspects in order to improve performance of the business. On
the other hand, study is done on entire operational management risk aspect which could
be narrowed through selection of one or two aspect only such internal audit or skilled
workforce. In addition to this, comparative analysis should be done that how other
banks are using internal audit as imperative tool for maintaining good performance in
the marketplace. This will be effective to meet expectations of different stakeholders
associated with bank as ethical conduct of business will be ensured. Apart from this,
significant impact of operation risk on performance of banking sector of UK can be
assessed. This will be effective for corporation to implement effective strategies through
which competitive edge can be created by addressing the studied operational risk. This
is because study will shed light on different types of risk (Credit, Market and Liquidity)
which are directly associated with operation of bank. Thus, study should be done by
focusing upon all small issues related to operation of business by which management
can improve performance with implementation of effective strategies.
68

REFERENCES
Journals and books
Fethi, M.D. and Pasiouras, F., (2010). Assessing bank efficiency and performance with
operational research and artificial intelligence techniques: A survey. European
Journal of Operational Research. 204(2). pp.189-198. Available from:
http://www.sciencedirect.com/science/article/pii/S0377221709005438 [Accessed
25th July 2016].
Fiordelisi, F. and Molyneux, P., (2010). The determinants of shareholder value in
European banking. Journal of Banking & Finance. 34(6). pp.1189-1200. Available
from: http://www.sciencedirect.com/science/article/pii/S037842660900315X.
[Accessed 25th July 2016].
Gillet, R., Hübner, G. and Plunus, S., (2010). Operational risk and reputation in the
financial industry. Journal of Banking & Finance. 34(1). pp.224-235. Available
from:http://www.sciencedirect.com/science/article/pii/S0378426609001873.
[Accessed 25th July 2016].
Hasan, M.M. and Dridi, J., (2010). The effects of the global crisis on Islamic and
conventional banks: A comparative study. IMF Working Papers. pp.1-46. Available
from:http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1750689. [Accessed 25th
July 2016].
Olweny, T. and Shipho, T.M., (2011). Effects of banking sectoral factors on the
profitability of commercial banks in Kenya. Economics and Finance Review.1(5).
pp.1-30. Available from:http://www.businessjournalz.org/articlepdf/efr1504e1.pdf.
[Accessed 25th July 2016].
Pagach, D.P. and Warr, R.S., (2010). The effects of enterprise risk management on
firm performance. Available at SSRN 1155218. Available from:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1155218. [Accessed 25th July
2016].
Sun, L. and Chang, T.P., (2011). A comprehensive analysis of the effects of risk
measures on bank efficiency: Evidence from emerging Asian countries. Journal of
Banking & Finance. pagep35(7). pp.1727-1735. Available
from:https://ideas.repec.org/a/eee/jbfina/v35y2011i7p1727-1735.html. [Accessed
25th July 2016].
Ames, M., Schuermann, T. and Scott, H. S., (2015). Bank capital for operational risk: A
tale of fragility and instability. Journal of Risk Management in Financial Institutions.
8(3). pp.227-243. Available
from:http://www.ingentaconnect.com/content/hsp/jrmfi/2015/00000008/00000003/
art00003. [Accessed 25th July 2016].
Badescu, A. L. and et.al., (2015). Modeling correlated frequencies with application in
operational risk management. Available
from:http://www.ingentaconnect.com/content/hsp/jrmfi/2015/00000008/00000003/
art00003. [Accessed 25th July 2016].
Berger, A. N., Bouwman, C. H., Kick, T. and Schaeck, K., (2016). Bank liquidity creation
following regulatory interventions and capital support. Journal of Financial
69

Intermediation. 26. pp.115-141. Available
from:http://www.sciencedirect.com/science/article/pii/S1042957316000024.
[Accessed 25th July 2016].
Berger, A. N., Imbierowicz, B. and Rauch, C., (2016). The roles of corporate
governance in bank failures during the recent financial crisis. Journal of Money,
Credit and Banking. 48(4). pp.729-770. Available
from:http://onlinelibrary.wiley.com/doi/10.1111/jmcb.12316/abstract?
userIsAuthenticated=false&deniedAccessCustomisedMessage. [Accessed 25th
July 2016].
Bromiley, P. and et.al., (2015). Enterprise risk management: Review, critique, and
research directions. Long range planning. 48(4). pp.265-276. Available
from:http://www.sciencedirect.com/science/article/pii/S0024630114000582.
[Accessed 25th July 2016].
Bushman, R. M. and Williams, C. D., (2015). Delayed expected loss recognition and the
risk profile of banks. Journal of Accounting Research. 53(3). pp.511-553. Available
from:http://onlinelibrary.wiley.com/doi/10.1111/1475-679X.12079/abstract?
userIsAuthenticated=false&deniedAccessCustomisedMessage. [Accessed 25th
July 2016].
Epure, M. and Lafuente, E., (2015). Monitoring bank performance in the presence of
risk. Journal of Productivity Analysis. 44(3). pp.265-281. Available from:
http://link.springer.com/article/10.1007/s11123-014-0413-z. [Accessed 25th July
2016].
Francis, B., Gupta, A. and Hasan, I., (2015). Impact of compensation structure and
managerial incentives on bank risk taking. European Journal of Operational
Research. 242(2). pp.651-676. Available
from:http://www.sciencedirect.com/science/article/pii/S0377221714008522.
[Accessed 25th July 2016].
Gao, T., Gupta, A., Gulpinar, N. and Zhu, Y., (2015). Optimal hedging strategy for risk
management on a network. Journal of Financial Stability. 16. pp.31-44.
Available
from:http://www.sciencedirect.com/science/article/pii/S1572308914001107.
[Accessed 25th July 2016].
Gatzert, N. and Schmit, J., (2016). Supporting strategic success through enterprise-
wide reputation risk management. The Journal of Risk Finance. 17(1). pp.26-45.
Available from:http://www.emeraldinsight.com/doi/abs/10.1108/JRF-09-2015-
0083. [Accessed 25th July 2016].
Giannakis, M. and Papadopoulos, T., (2016). Supply chain sustainability: a risk
management approach. International Journal of Production Economics. 171.
pp.455-470. Available
from:http://www.sciencedirect.com/science/article/pii/S0925527315002704.
[Accessed 25th July 2016].
Golub, B., (2015). Confronting regulatory and financial industry change at the world’s
largest asset manager: An interview with Ben Golub, Senior Managing Director
and Chief Risk Officer of BlackRock, Inc. Journal of Risk Management in
70

Financial Institutions. 8(3). pp.218-226. Available
from:http://www.ingentaconnect.com/content/hsp/jrmfi/2015/00000008/0000000
3/art00002. [Accessed 25th July 2016].
Grote, G., (2015). Promoting safety by increasing uncertainty–Implications for risk
management.Safety science. 71. pp.71-79. Available
from:http://www.sciencedirect.com/science/article/pii/S0925753514000307.
[Accessed 25th July 2016].
Haimes, Y. Y., (2015). Risk modeling, assessment, and management. John Wiley &
Sons. Available from:https://books.google.co.in/books?
hl=en&lr=&id=JvowBgAAQBAJ&oi=fnd&pg=PP11&dq=Risk+modeling,
+assessment,+and+management.&ots=DY3n2PQkrK&sig=Ss-
B_p2Tzlq3FvJTHOWVKpqUDFQ. [Accessed 25th July 2016].
Hall, M., Mikes, A. and Millo, Y., (2015). How do risk managers become influential? A
field study of toolmaking in two financial institutions. Management Accounting
Research. 26. pp.3-22. Available
from:http://www.sciencedirect.com/science/article/pii/S1044500514000675.
[Accessed 25th July 2016].
Hardy, C. and Maguire, S., (2016). Organizing risk: discourse, power, and “riskification”.
Academy of Management Review. 41(1). pp.80-108. Available from:
http://amr.aom.org/content/41/1/80.short. [Accessed 25th July 2016].
Ho, W. and et.al., (2015). Supply chain risk management: a literature
review. International Journal of Production Research. 53(16). pp.5031-5069.
Available
from:http://www.tandfonline.com/doi/abs/10.1080/00207543.2015.1030467.
[Accessed 25th July 2016].
Li, J. and et.al., (2015). On the aggregation of credit, market and operational
risks. Review of Quantitative Finance and Accounting. 44(1). pp.161-189.
Available from:
http://www.tandfonline.com/doi/abs/10.1080/00207543.2015.1030467#.V5YN6
KW1Gko. [Accessed 25th July 2016].
Lippe, P., Katz, D.M. and Jackson, D., (2015). Legal by Design: A New Paradigm for
Handling Complexity in Banking Regulation and Elsewhere in Law. Oregon Law
Review. 93(4). Available from:http://papers.ssrn.com/sol3/Papers.cfm?
abstract_id=2539315. [Accessed 25th July 2016].
McNeil, A. J., Frey, R. and Embrechts, P., (2015). Quantitative risk management:
Concepts, techniques and tools. Princeton university press. Available
from:https://books.google.co.in/books?
hl=en&lr=&id=SfJnBgAAQBAJ&oi=fnd&pg=PP1&dq=Quantitative+risk+manage
ment:+Concepts,
+techniques+and+tools&ots=luhRMICnqw&sig=fbAvPUTtODzdLPdaqAyeiYVbg
rE. [Accessed 25th July 2016].
Mizgier, K. J. and et.al., (2015). Managing operational disruptions through capital
adequacy and process improvement.European Journal of Operational
Research. 245(1). pp.320-332. Available from:
71

http://www.sciencedirect.com/science/article/pii/S0377221715001307.
[Accessed 25th July 2016].
Nikolaou, I., Evangelinos, K. and Leal Filho, W., (2015). A system dynamic approach for
exploring the effects of climate change risks on firms' economic performance.
Journal of Cleaner Production. 103. pp.499-506. Available
from:http://www.sciencedirect.com/science/article/pii/S0959652614010257.
[Accessed 25th July 2016].
Reason, J., (2016). Managing the risks of organizational accidents. Routledge.
Available from:https://books.google.co.in/books?
hl=en&lr=&id=UVCFCwAAQBAJ&oi=fnd&pg=PP1&dq=Managing+the+risks+of+
organizational+accidents.&ots=391dQWBzHq&sig=ZQSp-
bdWuZOe936q3rbenB8G1OQ#v=onepage&q=Managing%20the%20risks
%20of%20organizational%20accidents.&f=false. [Accessed 25th July 2016].
Sadgrove, K., (2016). The complete guide to business risk management. Routledge. .
Available from:https://books.google.co.in/books?
hl=en&lr=&id=jfiqCwAAQBAJ&oi=fnd&pg=PP1&dq=The+complete+guide+to+b
usiness+risk+management&ots=HVKUzbI7Jd&sig=foq4t1fIJHiho9OOFyEzAbiz
1rk. [Accessed 25th July 2016].
Schönsleben, P., (2016). Integral logistics management: Operations and supply chain
management within and across companies. CRC Press. . Available
from:https://books.google.co.in/books?
hl=en&lr=&id=ZQ_YCwAAQBAJ&oi=fnd&pg=PP1&dq=ntegral+logistics+manag
ement:
+Operations+and+supply+chain+management+within+and+across+companies
&ots=J_x9dQstJD&sig=W21XVUHtApBYSFgtw7Fc040Jcd8. [Accessed 25th
July 2016].
Stulz, R. M., (2015). Risk‐Taking and Risk Management by Banks. Journal of Applied
Corporate Finance. 27(1). pp.8-18. . Available
from:http://onlinelibrary.wiley.com/doi/10.1111/jacf.12099/full. [Accessed 25th
July 2016].
Su, P. and Liu, S., (2015). Dual sourcing in managing operational and disruption risks in
contract manufacturing. International Journal of Production Research. 53(1).
pp.291-306. . Available
from:http://www.tandfonline.com/doi/abs/10.1080/00207543.2014.957876#.V5Y
Or6W1Gko. [Accessed 25th July 2016].
Ward, J. and Peppard, J., (2016). The Strategic Management of Information Systems:
Building a Digital Strategy. John Wiley & Sons. pp. 49-395. Available from:
https://books.google.co.in/books?hl=en&lr=&id=JGG-
CgAAQBAJ&oi=fnd&pg=PP9&dq=The+Strategic+Management+of+Information
+Systems:
+Building+a+Digital+Strategy&ots=HdWu76SntX&sig=Cx2lrkFdeyDkMhCTqZkB
OjGLLQ8#v=onepage&q=The%20Strategic%20Management%20of
%20Information%20Systems%3A%20Building%20a%20Digital
%20Strategy&f=false. [Accessed 25th July 2016].
72

Wu, D., Olson, D. L. and Dolgui, A., 2015. Decision making in enterprise risk
management: A review and introduction to special issue. Omega. 57. pp.1-4.
Available
from:http://www.sciencedirect.com/science/article/pii/S0305048315000857.
[Accessed 25th July 2016].
Fiegen, M. A., 2010. Systematic review of research methods: the case of business
instruction. Reference Services Review. 38(3). pp.385–397. Available
from:http://www.sciencedirect.com/science/article/pii/S0305048315000857.
[Accessed 25th July 2016].
Grafton, J., Lillis, M. A. and Mahama, H., 2011. Mixed methods research in accounting.
Qualitative Research in Accounting & Management. 8(1). pp.5–21. Available
from:http://www.sciencedirect.com/science/article/pii/S0305048315000857.
[Accessed 25th July 2016].
Guercini, S., 2014. New qualitative research methodologies in management.
Management Decision. 52(4). pp.662–674. Available
from:http://www.sciencedirect.com/science/article/pii/S0305048315000857.
[Accessed 25th July 2016].
Hill, H. L., 2007. Thoughts for students considering becoming qualitative researchers –
Qualities of qualitative researchers. Qualitative Research Journal.7(1). pp.26–
31. Available
from:http://www.sciencedirect.com/science/article/pii/S0305048315000857.
[Accessed 25th July 2016].
Hogg, K. M., (2008. Composing Qualitative Research. Qualitative Market Research: An
International Journal. 11(4). pp.439–443. Available
from:http://www.sciencedirect.com/science/article/pii/S0305048315000857.
[Accessed 25th July 2016].
Hussain, P. T., (2011). Research Methodology in Physical Education. Pinnacle
Technology. Available
from:http://www.sciencedirect.com/science/article/pii/S0305048315000857.
[Accessed 25th July 2016].
Kothari, R. C., (2011). Research Methodology: Methods and Techniques. New Age
International. Available
from:http://www.sciencedirect.com/science/article/pii/S0305048315000857.
[Accessed 25th July 2016].
Lee, P., (2014). Qualitative perspectives: through a methodological lens. Qualitative
Research in Accounting & Management. 11(1). pp.13–28. Available
from:http://www.sciencedirect.com/science/article/pii/S0305048315000857.
[Accessed 25th July 2016].
Chorafas, D. N., (2003). Operational Risk Control with Basel II: Basic Principles and
Capital Requirements. Butterworth-Heinemann. pp. 1-4. Available
from:http://www.sciencedirect.com/science/article/pii/S0305048315000857.
[Accessed 25th July 2016]. PAGE NO. MISSING
Daniels, K. and Ramirez, GG., (2008). Information, Credit Risk, Lender Specialization
and Loan Pricing: Evidence from the DIP Financing Market. Journal of Financial
73

Services Research. 34. 35–59. Available from:
http://www.academypublish.org/papers/pdf/174.pdf. [Accessed 25th July 2016].
Davydenko cit. in Matoussi H, (2010). Credit–risk evaluation of a Tunisian commercial
bank: logistic regression vs neural network modeling. Accounting and Management
Information Systems. 9(1). pp.92–119. Available from:
http://www.academypublish.org/papers/pdf/174.pdf. [Accessed 25th July 2016].
Dima, A. M., (2009). Operational risk assessment tools for quality management in
banking services. Amfiteatru Economic Journal. XI(26). pp.364-372. Available
from: http://www.academypublish.org/papers/pdf/174.pdf. [Accessed 25th July
2016].
Kenneth, D. and Ramirez, G. G., (2008). Information, Credit Risk, Lender
Specialization and Loan Pricing: Evidence from the DIP Financing Market. Journal
of Financial Services Research. 34. pp.35–59. Available from:
http://www.academypublish.org/papers/pdf/174.pdf. [Accessed 25th July 2016].
Sturm, P., 2013. Operational and reputational risk in the European banking industry:
The market reaction to operational risk events. Journal of Economic Behavior &
Organization. 85. pp.191-206
http://www.sciencedirect.com/science/article/pii/S0378426612001197
Biell, L. and Muller, A., 2013. Sudden crash or long torture: the timing of market
reactions to operational loss events. Journal of Banking & Finance. 37(7). pp.2628-
2638.
http://www.emeraldinsight.com/doi/abs/10.1108/02686909910289849
SHAH, M.H., 2013. Critical success factors for preventing e-banking fraud. Journal of
Internet Banking and Commerce. 18(2).
http://www.emeraldinsight.com/doi/abs/10.1108/MAJ-08-2014-1073
Uzkurt, C., and et.al., 2013. Role of innovation in the relationship between
organizational culture and firm performance: A study of the banking sector in
Turkey. European Journal of innovation management. 16(1). pp.92-117.
http://onlinelibrary.wiley.com/doi/10.1111/jofi.12206/full
Fiordelisi, F., Soana, M.G. and Schwizer, P., 2013. The determinants of reputational
risk in the banking sector. Journal of Banking & Finance. 37(5). pp.1359-1371.
http://www.sciencedirect.com/science/article/pii/S0378426613001106
Fiordelisi, F., Soana, M.G. and Schwizer, P., 2014. Reputational losses and operational
risk in banking. The European Journal of Finance. 20(2). pp.105-124.
http://www.sciencedirect.com/science/article/pii/S0305048312000254
Pedersen, L.M., Nielsen, K.J. and Kines, P., 2012. Realistic evaluation as a new way to
design and evaluate occupational safety interventions. Safety Science. 50(1).
pp.48-54.
http://www.sciencedirect.com/science/article/pii/S0378426613001106
Bátiz‐Lazo, B. and Wood, D., 2013. Management of core capabilities in Mexican and
European banks. International Journal of Bank Marketing.
74

http://www.ingentaconnect.com/content/hsp/jrmfi/2014/00000007/00000003/art00009
Chen, Y.S. and Cheng, C.H., 2013. Hybrid models based on rough set classifiers for
setting credit rating decision rules in the global banking industry. Knowledge-Based
Systems. 39. pp.224-239.
http://www.sciencedirect.com/science/article/pii/S1572308913000119
Paradi, J.C. and Zhu, H., 2013. A survey on bank branch efficiency and performance
research with data envelopment analysis. Omega. 41(1). pp.61-79.
http://www.sciencedirect.com/science/article/pii/S0305048311000351
Shim, J., 2013. Bank capital buffer and portfolio risk: The influence of business cycle
and revenue diversification. Journal of Banking & Finance. 37(3). pp.761-772.
http://www.emeraldinsight.com/doi/abs/10.1108/02652320110383176
King, M.R., 2013. The Basel III net stable funding ratio and bank net interest margins.
Journal of Banking & Finance. 37(11). pp.4144-4156.
http://www.sciencedirect.com/science/article/pii/S016920701300143X
Anginer, D., Demirguc-Kunt, A. and Zhu, M., 2014. How does deposit insurance affect
bank risk? Evidence from the recent crisis. Journal of Banking & finance. 48.
pp.312-321.
http://www.emeraldinsight.com/doi/abs/10.1108/JSBED-08-2012-0097
Michalski, G., 2013. Financial consequences linked with investments in current assets:
Polish firms case. In European Financial Systems 2013, Proceedings of the 10th
International Scientific Conference, Brno: Masaryk University.
http://www.sciencedirect.com/science/article/pii/S0969593113000991
Mols, N.P., 2013. The Internet and the banks’ strategic distribution channel decisions.
International Journal of Bank Marketing.
http://www.sciencedirect.com/science/article/pii/S0378426615001314
Embrechts, P. and Hofert, M., 2014. Statistics and quantitative risk management for
banking and insurance. Annual Review of Statistics and Its Application. 1. pp.493-
514.
http://www.inderscienceonline.com/doi/abs/10.1504/IJBAAF.2013.058090
Alderman, H. and Yemtsov, R., 2013. How Can Safety Nets Contribute to Economic
Growth?. The World Bank Economic Review, p.lht011.
http://wber.oxfordjournals.org/content/early/2013/05/31/wber.lht011.short
Online
Risk. net. (2016). [Online]. Available through: <http://www.risk.net/operational-risk-and-
regulation/opinion/2464946/usd15bn-subprime-hit-at-hsbc-dwarfs-other-op-risk-
losses>. [Accessed on 26th July 2016].
Banking regulation. (2016). [Online]. Available through:
<http://www.economicsonline.co.uk/Business_economics/Banking+regulation.html
>. [Accessed on 26th July 2016].
Basel Committee on Banking supervision. (2011). [Online]. Available through:
<http://www.bis.org/publ/bcbs195.pdf>. [Accessed on 26th July 2016].
HSBC. (2016). Internal control. [Online]. Available through:
<http://www.hsbc.com/about-hsbc/corporate-governance/internal-control>.
[Accessed on 26th July 2016]. HAS TO BE HSBC
75

Managing trade risk. (2016). [Online]. Available through:
<http://www.business.hsbc.co.in/en-gb/article/managing-trade-risk>. [Accessed on
26th July 2016].
Dare, P., 2015. Wilington Risk & Compliance. [Online]. Available through:
<http://www.int-comp.com/ict-views/posts/2012/7/18/hsbc-money-laundering-
failures-5-points-we-must-all-learn-for-a-start-aml-is-not-just-a-process/>.
[Accessed on 26th July 2016].
Dima, A. M. and Orzea, I., (2016). [PDF]. Available through:
<http://www.academypublish.org/papers/pdf/174.pdf>. [Accessed on 26th July
2016].
Know-your-customers, 2016. [Online]. Available through:
<https://www.assetmanagement.hsbc.com/in/mutual-funds/kyc.html>. [Accessed
on 26th July 2016].
The seven operation risk event type projected by Basel 2. (2016). [Online]. Available
through: <http://www.care-web.co.uk/blog/seven-operational-risk-event-types-
projected-basel-ii/>. [Accessed on 26th July 2016].
The three lines of defense in effective risk management and control. (2013). [Online].
Available through: <https://na.theiia.org/standards-guidance/Public
%20Documents/PP%20The%20Three%20Lines%20of%20Defense%20in
%20Effective%20Risk%20Management%20and%20Control.pdf>. [Accessed on
25th July 2016].
Doughty, K., (2016). The Three Lines of Defence Related to Risk Governance.
[Online]. Available through: <http://www.isaca.org/Journal/archives/2011/Volume-
5/Pages/The-Three-Lines-of-Defence-Related-to-Risk-Governance.aspx>.
[Accessed on 29th July 2016].
Research guides. (2016). Organizing Your Social Sciences Research Paper:
Limitations of the Study. [Online]. Available through:
<http://libguides.usc.edu/writingguide/limitations>. [Accessed on 1st August 2016].
David, B. and Resnik, J. D. (2016). What is Ethics in Research & Why is it Important?.
[Online]. Available through:
<http://www.niehs.nih.gov/research/resources/bioethics/whatis/>. [Accessed on 1st
August 2016].
Operational Risk. 2015. [Online]. Available through: <https://annualreport.deutsche-
bank.com/2014/ar/management-report/risk-report/operational-risk.html>.
[Accessed on 5th August 2016].
Standard Chartered. 2016. [Online]. Available through:
<http://reports.standardchartered.com/annual-report-2012/riskreview/riskreview/
operationalreputationalpensionrisk.html?cat=m>. [Accessed on 5th August 2016].
International Finance Corporation. 2016 [pdf]. Available through:
<http://www.ifc.org/wps/wcm/connect/e4f8ce004d6f9e3d85c8b548b49f4568/ECA-
CR_OPRISK_training.pdf?MOD=AJPERES>. [Accessed on 5th August 2016].
Citi. 2016. Citigroup Statement on Basel III Advanced Approach Reporting. [Online].
Available through: <http://www.citigroup.com/citi/news/2014/140221a.htm>.
[Accessed on 5th August 2016].
76

APPENDIX: QUESTIONNAIRE
Name____________________
Gender:
 Male
 Female
Age:
 18-30 Years
 31-40 Years
 41-50 Years
 50 and above
1. In your opinion why operational risk occurs to HSBC?
 Failed internal process
 Poor system
 External events
 People
 All of the above
2. Do you think that operational risk management tools are helpful to maintain good
performance of HSBC?
 Yes
 No
 Can't say
3. HSBC is facing issue related to employment practices and workplace safety?
 Strongly agree
 Agree
 Neutral
 Disagree
 Strongly disagree
4. HSBC applies effective operational risk management practices?
 Strongly agree
 Agree
77

 Neutral
 Disagree
 Strongly disagree
5. What are the different measures to manage the operational risk management in
HSBC?
 Acceptable level of internal control
 Centralized database
 Timely risk management meeting
 All of the above
6. In your opinion to what extent operational risk is affecting performance of the HSBC?
 Almost always
 Usually
 Often
 Sometimes
7. Do you think that operational risk management of HSBC support workforce in
maintaining good performance?
 Yes
 No
 Can't say
8. Which method is considered utmost for mitigation of risk in HSBC?
 Insurance
 Portfolios diversification
 Hedging
9. Basel regulation and its compliance help HSBC is effective management of
operational risk?
 Highly satisfied
 Satisfied
 Neutral
 Dissatisfied
 Highly dissatisfied
78

10. What are the effective method for reducing operational risk of HSBC?
 Compliance of regulatory framework
 Strong risk culture
 Skilled workforce
 All of the above
11. Current operational risk framework assist HSBC in operational risk management?
 Highly satisfied
 Satisfied
 Neutral
 Dissatisfied
 Highly dissatisfied
79