The Main Measurement Approaches and their Comparison of Commercial Bank Operational Risk

The management of operational risk plays an increasingly prominent status in commercial banks operational management, while the measurement of operational risk is the premise to manage the operational risk effectively. There are several approaches to measure operational risks, mainly including Basic Indicator Approach, Standardized Approach, Internal Measurement Approach and Loss Distribution Approach. These approaches have different advantages and disadvantages, and are applied in different environment and conditions. Commercial banks should select appropriate approach according to its own business and risk features.