IDEAS home Printed from https://ideas.repec.org/a/eme/aaajpp/v22y2009i4p626-660.html
   My bibliography  Save this article

Currency options trading practices and the construction and governance of operational risk

Author

Listed:
  • Habib Mahama
  • Chen Yu Ming

Abstract

Purpose - Recent failures and scandals in the banking and financial services industry have served as catalysts for anxiety about operational risk. In particular, the Basel II accord emphasises the need to develop methodologies for assessing and managing this category of risk. However, operational risk is said to be an elusive and problematic concept. This paper aims to examine how certain events in the banking and financial services industry become enframed and constructed as operational risk and how such risk is managed. Design/methodology/approach - The paper draws on the sociology of risk literature to analyse how an “unauthorised trading” event (and associated losses) that occurred in the currency options trading desk of the National Australia Bank (NAB) was enframed and constructed as operational risk. Data are gathered through metadiscourse analysis of textual materials relating to this event. Findings - The analysis reveals the social and institutional mechanisms underlying the construction of risk and the contested nature of risk knowledge. In particular, it highlights the significant role of media discourse in articulating risk claims and dominating public discourse about risk. It also highlights the moral character of the concept of risk and how the moralising of risk discourse leads to the creation of particular forms of subjectivities and the operationalisation of certain risk management rationalities in NAB. Originality/value - The paper will be helpful in improving researchers' and practitioners' understanding of how, in a given field of possibilities, particular events become constructed as operational risk.

Suggested Citation

  • Habib Mahama & Chen Yu Ming, 2009. "Currency options trading practices and the construction and governance of operational risk," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 22(4), pages 626-660, May.
  • Handle: RePEc:eme:aaajpp:v:22:y:2009:i:4:p:626-660
    DOI: 10.1108/09513570910955461
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/09513570910955461/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers

    File URL: https://www.emerald.com/insight/content/doi/10.1108/09513570910955461/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers

    File URL: https://libkey.io/10.1108/09513570910955461?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Claudio Ciborra, 2006. "Imbrication of Representations: Risk and Digital Technologies," Journal of Management Studies, Wiley Blackwell, vol. 43(6), pages 1339-1356, September.
    2. Rosenberg, Joshua V. & Schuermann, Til, 2006. "A general approach to integrated risk management with skewed, fat-tailed risks," Journal of Financial Economics, Elsevier, vol. 79(3), pages 569-614, March.
    3. Cummins, J. David & Lewis, Christopher M. & Wei, Ran, 2006. "The market value impact of operational loss events for US banks and insurers," Journal of Banking & Finance, Elsevier, vol. 30(10), pages 2605-2634, October.
    4. Chavez-Demoulin, V. & Embrechts, P. & Neslehova, J., 2006. "Quantitative models for operational risk: Extremes, dependence and aggregation," Journal of Banking & Finance, Elsevier, vol. 30(10), pages 2635-2658, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Spence, Laura J. & Rinaldi, Leonardo, 2014. "Governmentality in accounting and accountability: A case study of embedding sustainability in a supply chain," Accounting, Organizations and Society, Elsevier, vol. 39(6), pages 433-452.
    2. Bui, Binh & Cordery, Carolyn J. & Wang, Zhichao, 2019. "Risk management in local authorities: An application of Schatzki's social site ontology," The British Accounting Review, Elsevier, vol. 51(3), pages 299-315.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chernobai, Anna & Yildirim, Yildiray, 2008. "The dynamics of operational loss clustering," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2655-2666, December.
    2. Iñaki Aldasoro & Leonardo Gambacorta & Paolo Giudici & Thomas Leach, 2023. "Operational and Cyber Risks in the Financial Sector," International Journal of Central Banking, International Journal of Central Banking, vol. 19(5), pages 340-402, December.
    3. Uddin, Md Hamid & Mollah, Sabur & Islam, Nazrul & Ali, Md Hakim, 2023. "Does digital transformation matter for operational risk exposure?," Technological Forecasting and Social Change, Elsevier, vol. 197(C).
    4. Eckert, Christian & Gatzert, Nadine, 2017. "Modeling operational risk incorporating reputation risk: An integrated analysis for financial firms," Insurance: Mathematics and Economics, Elsevier, vol. 72(C), pages 122-137.
    5. Jianping Li & Lu Wei & Cheng-Few Lee & Xiaoqian Zhu & Dengsheng Wu, 2018. "Financial statements based bank risk aggregation," Review of Quantitative Finance and Accounting, Springer, vol. 50(3), pages 673-694, April.
    6. Kristine Watson Hankins, 2011. "How Do Financial Firms Manage Risk? Unraveling the Interaction of Financial and Operational Hedging," Management Science, INFORMS, vol. 57(12), pages 2197-2212, December.
    7. Michael C. Munnix & Rudi Schafer, 2011. "A Copula Approach on the Dynamics of Statistical Dependencies in the US Stock Market," Papers 1102.1099, arXiv.org, revised Mar 2011.
    8. Barakat, Ahmed & Chernobai, Anna & Wahrenburg, Mark, 2014. "Information asymmetry around operational risk announcements," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 152-179.
    9. Thomas Conlon & Xing Huan & Steven Ongena, 2020. "Operational Risk Capital," Swiss Finance Institute Research Paper Series 20-55, Swiss Finance Institute.
    10. Dahen, Hela & Dionne, Georges, 2010. "Scaling models for the severity and frequency of external operational loss data," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1484-1496, July.
    11. Chernobai, Anna & Ozdagli, Ali & Wang, Jianlin, 2021. "Business complexity and risk management: Evidence from operational risk events in U.S. bank holding companies," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 418-440.
    12. Elshahat, A. & Parhizgari, Ali & Hong, Liang, 2012. "The information content of the Banking Regulatory Agencies and the Depository Credit Intermediation Institutions," Journal of Economics and Business, Elsevier, vol. 64(1), pages 90-104.
    13. Münnix, Michael C. & Schäfer, Rudi, 2011. "A copula approach on the dynamics of statistical dependencies in the US stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(23), pages 4251-4259.
    14. Paul Embrechts & Giovanni Puccetti, 2006. "Aggregating risk capital, with an application to operational risk," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 31(2), pages 71-90, December.
    15. Xu, Chi & Zheng, Chunling & Wang, Donghua & Ji, Jingru & Wang, Nuan, 2019. "Double correlation model for operational risk: Evidence from Chinese commercial banks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 516(C), pages 327-339.
    16. Xingnan Jiang, 2018. "Operational risk and its impact on North American and British banks," Applied Economics, Taylor & Francis Journals, vol. 50(8), pages 920-933, February.
    17. Cheng, Maoyong & Qu, Yang & Jiang, Chunxia & Zhao, Chenchen, 2022. "Is cloud computing the digital solution to the future of banking?," Journal of Financial Stability, Elsevier, vol. 63(C).
    18. Stefan Mittnik & Sandra Paterlini & Tina Yener, 2011. "Operational–risk Dependencies and the Determination of Risk Capital," Center for Economic Research (RECent) 070, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    19. Marcel Wollschlager & Rudi Schafer, 2015. "Impact of non-stationarity on estimating and modeling empirical copulas of daily stock returns," Papers 1506.08054, arXiv.org.
    20. Al-Amri, Khalid & Davydov, Yevgeniy, 2016. "Testing the effectiveness of ERM: Evidence from operational losses," Journal of Economics and Business, Elsevier, vol. 87(C), pages 70-82.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:aaajpp:v:22:y:2009:i:4:p:626-660. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.