Mitigating operational risk through knowledge management

Abstract

The purpose of this paper is to demonstrate a profound correlation between Operational Risk (OR) that subsists in Banking industry and Knowledge Management (KM). The research aims to provide empirical evidence with regards to whether KM mitigates OR or has no considerable effect on it. The variables under study, along with their distinct dimensions, are subjected to linear regression to obtain verifiable results. The results show that a significant relationship exists between the KM dimensions and the different OR dimensions. The findings verify that some of the KM elements mitigate some of the OR aspects. Hence, management must strive to implement KM techniques throughout the whole organization in an attempt to alleviate OR; provided that operational risk cannot be entirely purged. Culminating operational risk ultimately leads to amplified return on investments and, thus, improved profitability.