The Role of Technology in Operation Risk Management and Performance Evaluation in Dubai's Banking Sector

The role of technology in operation risk management and
evaluation of its performance in banking sector in Dubai
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Abstract
The purpose of the research is to examine the role of technology in operation risk management
in the context of banking sector of Dubai. However, the secondary objective of the research
paper is to evaluate the impact of technology in performance management of banking sector of
Dubai. Based on the purpose of conducting the thesis, four research objectives as well as
questions has been synthesized in the introductory chapter based on which the entire research
work has been conducted. The literature review part detailed about significant concepts and
theories related to the dissertation topic and hence have identified the literature gap effectively.
The research philosophy selected by the researcher for conducting this particular study is
Positivism Research Philosophy to adhere to entire study with factual knowledge.
The researcher has employed deductive research approach in order to test the validity of the
thesis. The particular study is based on primary research wherein data has been collected through
qualitative approach. However, the survey has been done in response with five operational
managers of Emirates Investment Bank, Citibank N.A (UAE), Commercial Bank of Dubai,
Dubai Islamic Bank, Dubai Finance Bank. Precisely, it can be said that data has been collected
through qualitative method wherein five operational managers of the above-mentioned banks of
Dubai have been interviewed in order to comprehend the significance of technology in
mitigating the operational risk and enhancing the performance of the banking organizations.
Thus, the researcher has considered some moral and ethical foundation that are Data Protection
Act 1998 and Privacy Amendment 2000 in order to protect the dignity and fidelity of the
participants. In order to conduct data analysis part in the particular study, several charts, graphs
and diagrams has been utilized by the researcher.
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Table of Contents
Chapter 1: Introduction....................................................................................................................5
1.0 Introduction to the chapter.........................................................................................................5
1.1 Background/Current scenario of the study...........................................................................5
1.2 Aims of the thesis......................................................................................................................6
1.3 Objectives of the thesis..............................................................................................................6
1.4 Research Questions....................................................................................................................6
1.5 Why this topic was undertaken? Or Significance of the research.............................................6
1.6 Research rationale......................................................................................................................7
1.7 Summary....................................................................................................................................7
Chapter 2: Literature Review...........................................................................................................8
2.0 Introduction to the chapter.....................................................................................................8
2.1 Concept of operational risk and operational risk management within the banking sector....8
2.2 Concept of performance management theory......................................................................15
2.3 The performance management theory in relation to technology, banking and operational
risks............................................................................................................................................17
2.4 The Parameters of performance management within banking sector and the Key
Performance Indicators..............................................................................................................18
2.5 Models for the identification of the operational risks..........................................................20
2.6 The ways in which technology has affected operations performance and operations risk
management...............................................................................................................................21
2.7 Conceptual Framework........................................................................................................29
2.8 Literature gap.......................................................................................................................29
2.9 Summary..............................................................................................................................31
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Chapter 3: Research Methodology................................................................................................32
3.0 Introduction..........................................................................................................................32
3.1 Method Outline....................................................................................................................32
3.2 Research onion.....................................................................................................................32
3.3 Research philosophy............................................................................................................33
3.4 Research Approach..............................................................................................................34
3.5 Research Design..................................................................................................................34
3.6 Research Strategy................................................................................................................35
3.7 Data Collection and analysis...............................................................................................36
3.8 Population and Sampling.....................................................................................................36
3.9 Ethical Consideration...........................................................................................................37
3.10 Summary............................................................................................................................37
References......................................................................................................................................38
Appendices....................................................................................................................................50
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Chapter 1: Introduction
1.0 Introduction to the chapter
This particular research aims at exploring ad analyzing the impact of technologies in mitigating
and evaluating performance of the banking sector in Dubai. This chapter will basically
emphasize on the current scenario of the issue selected for dissertation and based on that the
research aim as well as objectives are framed. The research questions of the thesis will also be
synthesized in this chapter in order to address the research objectives effectively. However, the
research rationale and significance of the study in this chapter will enable the reader to have clear
understanding about the particular issue of the research.
1.1 Background/Current scenario of the study
Operational risk is considered as a significant area of focus in Dubai banking sector which might
arise from cyber threats, trading, cultural issues, money laundering issues and many more
(Alzaidi, 2018). According to a study, the three major risks in the UAE banking sector can be
categorized as operating risk, followed by foreign exchange risk and credit risk as well (Asif,
2019). The findings of the study stated that the banking sector of Dubai is efficient enough to
identify, assess and manage the operational risks as well as the credit risks through utilization of
technologies. Technologies such as Blockchain technology for mitigating the issues related to the
credit risks, embracing the Artificial Intelligence and Robotic Process Automation to resolve the
issues related to operational risks of the banking sector is most applicable in modern-day
scenario. Utilization of the technological innovation in the banking sector of UAE has enhanced
the performance in terms of financial structure as well as experience of the banking customers
(Karajovic et al., 2019). The banking organizations of Dubai have embraced digital banking
facilities due to the significant increase of e-commerce business and hence 20% to 25% of the
banking customers largely depends on such facility which has enhanced their experience
(Mukminin, 2019). As per the reports of Khaleej times, adoption of artificial intelligence in
banking sector of Dubai has a game changing impact because it has intensified the customer
engagement rate with the banking organizations operating in UAE (Verma, 2017). Several banks
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of Dubai has utilized chat boxes for proving operational assistance to the customers and hence is
viewed as a technological consideration for resolving the operational risks (Saleh, 2018).
1.2 Aims of the thesis
The basic purpose or aim of the study is to analyze the role or impact of technology in managing
the operation risk and assessing the performance of banking sector in Dubai.
1.3 Objectives of the thesis
The research objectives in this particular study are enlisted below in the following points:
 To determine the operational risks of the banking sector in the context of Dubai To analyze the impact of risk management within the banking sector of Dubai To evaluate the performance of the banking sector in the context of Dubai To identify the role of technologies in banking sector of Dubai in mitigating the operational
risks
1.4 Research Questions
The research questions for the thesis are under laid:
1. What are the operational risks in the banking sector of Dubai?
2. How do risk management impacts the banking sector of Dubai?
3. How the performance of the banking sector is assessed in Dubai?
4. How important technologies are in mitigating the operational risks of banking sector in the
context of Dubai?
1.5 Significance of the research
The outcomes or findings of the research are deemed to be useful in comprehending the role of
technology in effective risk management and performance evaluation of the banking sector of
Dubai. Basically, banking organizations across the world are utilizing the technological
innovations to mitigate the pertinent issues such as associated risks ranging from operating risks
to market risks, enhancing the customer engagement rate and the financial performance of these
financial organizations (Shayestehfar and Yazdani, 2019). In such a scenario, the particular
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research will enable the readers to understand the current scenario of the banking sector in
context of Dubai. The information and concepts that are explained in this context will be helpful
for the entire financial sector of UAE in terms of utilizing technological innovation for
improvising the overall performance of the banking organizations and mitigating the operating
risks. However, certain issues and challenges exists in implementation of technology in the
banks and other financial organizations of Dubai. Thus, the research findings will enable the
concerned organizations to identify several reasons for adopting such technology and regulations
of the Central Bank of UAE to combat the impact of operational risks on the banking
organizations. Conducting the particular research will ensure effective utilization of technologies
in the banking sector of Dubai in order to address the operational risk and enhance the overall
performance level in terms of customer satisfaction and financial structure.
1.6 Research rationale
The banking sector of Dubai is heading towards developing digitalized environment in order to
enhance the experience level of the customers and lowering the banking risks (Tesunbi and
Tesunbi, 2019). However, in this context the concerned organizations are confronted with
several issues and challenges for effective implementation of technology in the banking sector of
UAE. It is apparent from the survey that banking regulations are sometimes are not effective
enough to deal with the market and operational risks of the banking sector due to volatility of the
industry. In such a scenario the combination of technology and banking regulations are often
utilized by the banking organizations of Dubai for effective risk management. This particular
research work plays a crucial role in comprehending the scope of technology in risk management
as well as performance management of the banking sectors in Dubai. After conducting the study,
the researcher can effectively conclude about the impact of technology on the banking sector of
Dubai.
1.7 Summary
The introductory chapter lay foundation for the entire dissertation as it details about the current
scenario or background of the study. Based on the background the research aim and objectives
have been identified in the chapter. However, the research questions have been synthesized in
this particular chapter in order to address the research aim and objectives. The significance of the
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study and rationale outlines the reason for conducting the research as well as the expected
benefits from the research findings.
Chapter 2: Literature Review
2.0 Introduction to the chapter
The section on literature review encompasses critical review of a number of research journals,
articles and books, relevant to the topic undertaken for the research; this helps in gaining a clear
understanding of the underlying concepts as well as the connection between different variables
involved in the research topic. This research topic deals with investigating and comprehending
the role of technology in operational risk management within the banking sector and the
evaluation of the performance of technology in the banking sector, with special focus on the
banking sector of Dubai. Hence, the research articles and journals chosen for the purpose
basically deals with the concepts of operational risk management, performance management,
model sand theories relevant to the concepts as well as the key performance indicators and
parameters of performance management systems, as is applicable to the banking sector, in
general, as well as in Dubai, in particular.
2.1 Concept of operational risk and operational risk management within the banking sector
According to Archer and Haron, (2013), Operational risk can be defined as “the risk of loss
resulting from inadequate or failed internal processes, people and systems or from external
events, including the legal risks and excluding the strategic and reputational risks” (as put
forth by Basel Committee on Banking Supervision, 2003). Operational risks are dynamic in
nature and quantification of such types of risks, identification as well as its mitigation is quite
intricate. As per the studies of Barakat and Hussainey, (2013), the operational risks are a tad bit
different from the other banking risks in the fact that it is ‘intrinsic’to the organization and is
stimulated by several factors such as business growth, regulatory landscape, preferences of the
customers, internal business processes and external factors like financial instability and natural
calamity.
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