Operational Risk Management in Foreign Exchange Dealing

710 Words3 Pages
Operational Risk Management in Foreign Exchange Dealing Abstract This paper discusses operational risk management in foreign exchange dealing for commercial banks in Tanzania. The paper further defines the problem and showing evidence that the problem is still in existence and outlines areas that require further researches from other literatures with the same research problem. It outlines the questions to be used in the research and shows the relevance of the study and its significance to commercial banks and the Tanzanian society at large. Problem Definition Current worldwide banking and financial scandals have shifted attention to the impact of operation risks in dealing with foreign exchange. A body of research reveals that the underlying causes of these scandals are Operational Risks and not credit or market risks as was initially understood (Thonabauer & Nösslinger, 2006). There have been scandals that have rocked the foreign exchange markets which supports the conception that operational risks is still present in most financial institutions. Recently there have been two operational risk losses in the foreign exchange markets are the National Australia Bank's $227 million loss in 2004 and Allied Irish Bank's $750 million loss in the year 2002 (Bank for International Settlements, 2004). These losses have negatively impacted these Banks’s profitability and reputation leading to low exchanges and clientele served. In addition, apart from scandalous losses, uncontrolled
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