Measuring the impact of operational risk on profitability: Case of Moroccan banks

Abstract

Today most financial intermediaries have emphasized a focus on operational risk management, due to several bank losses worldwide. These dysfunctions reflect the operational risk impact on banks' profitability. It became clear that there is an urgent need for robust strategies to identify, measure, and target the types of operational risk according to their severity.In Morocco, several performance indicators allow measuring profitability in particular the ROA and the ROE. In this case, this study aims to represent the evolution of the principal performance indicators to establish a diagnosis of the Moroccan banking sector and to analyze the impact of the seven risk categories projected by the Basel Committee(Internal fraud, External fraud, Employment practice and workplace safety, Customer’s products and business practices, Damage to tangible assets, Business and systems malfunctions, and Execution delivery and management of processes)on Moroccan banks profitability.