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Application of Multi-Criteria Assessment in Banking Risk Management

Author

Listed:
  • Ristanović Vladimir

    (Institute of European Studies, Belgrade, Serbia.)

  • Primorac Dinko

    (Department of Economy, University North Croatia, Varaždin, Croatia.)

  • Mikić Mihaela

    (University of Zagreb Faculty of Economics and Business, Zagreb, Croatia.)

Abstract

Banks face a number of business risks on a daily basis. Today, operational risk is dominant. The aim of this paper is to develop a decision-making system when choosing a method of operational risk management by using the Analytical Hierarchy Process (the AHP method) and the Fuzzy Analytic Hierarchy Process (the FAHP method). Analytical hierarchical process is a simple efficient process in solving decision-making problems. The final decision depends on the assessment of a set of alternatives and the decision criteria. The main purpose of the process is to find appropriate solutions for defined user factors in the current competitive environment. The results obtained by the classical AHP method, as well as the FAHP method, show that external factors are the dominant criterion, especially during the financial crisis or the Covid19 pandemic, and that solutions should be sought in international standards, using control tools created by the banks themselves.

Suggested Citation

  • Ristanović Vladimir & Primorac Dinko & Mikić Mihaela, 2023. "Application of Multi-Criteria Assessment in Banking Risk Management," Zagreb International Review of Economics and Business, Sciendo, vol. 26(1), pages 97-117.
    • Handle: RePEc:vrs:zirebs:v:26:y:2023:i:1:p:97-117:n:1005
    DOI: 10.2478/zireb-2023-0005
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    More about this item

    Keywords

    operational risk; AHP/FAHP methods; decision-making;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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