Operational risk disclosures in financial institutions

In this paper we examine the current disclosure standards of financial institutions with regards to their operational risk measurement and management systems. Our sample covers 57 financial institutions across five countries. We discuss our findings in light of the Basel II recommendations on risk disclosure. We find that there is currently high variability in the quality and quantity of disclosure on operational risk. We conclude that while it is likely that the Basel II requirements will lead financial institutions to disclose greater information on operational risk, the lack of consistency in the way financial institutions report this information places doubt over its usefulness to external parties.