Operational Risk: Emerging Markets, Sectors and Measurement

Mitra, S., Karathanasopoulos, A., Sermpinis, G., Dunis, C. and Hood, J. 2015. Operational Risk: Emerging Markets, Sectors and Measurement . European Journal of Operational Research. 241 (1), pp. 122-132. https://doi.org/10.1016/j.ejor.2014.08.021

TitleOperational Risk: Emerging Markets, Sectors and Measurement
TypeJournal article
AuthorsMitra, S., Karathanasopoulos, A., Sermpinis, G., Dunis, C. and Hood, J.
Abstract

The role of decision support systems in mitigating operational risks in firms is well established. However, there is a lack of investment in decision support systems in emerging markets, even though inadequate operational risk management is a key cause of discouraging external investment. This has also been exacerbated by insufficient understanding of operational risk in emerging markets, which can be attributed to past operational risk measurement techniques, limited studies on emerging markets and inadequate data.
In this paper, using current operational risk techniques, the operational risk of developed and emerging market firms is measured for 100 different companies, for 4 different industry sectors and 5 different countries. Firstly, it is found that operational risk is consistently higher in emerging market firms than in the developed markets. Secondly, it is found that operational risk is not only dependent upon the industry sector but also that market development is the more dominant factor. Thirdly, it is found that the market development and the sector influence the shape of the operational risk distribution, in particular tail and skewness risk. Furthermore, an operational risk measurement method is provided that is applicable to emerging markets. Our results are consistent with under investment in decision support systems in emerging markets and imply operational risk management can be improved by increased investment.

Keywordsoperational risk
emerging markets
sector
risk management
investment
JournalEuropean Journal of Operational Research
Journal citation241 (1), pp. 122-132
ISSN0377-2217
Year2015
PublisherElsevier
Accepted author manuscript
License
CC BY-NC-ND 4.0
File Access Level
Open (open metadata and files)
Digital Object Identifier (DOI)https://doi.org/10.1016/j.ejor.2014.08.021
Publication dates
Published in print08 Oct 2014
Published in print16 Feb 2015

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