AN APPLICATION OF BAYESIAN PROBABILISTIC NETWORK MEASURING OPERATIONAL LOSS IN INDIAN BANKING INDUSTRY

The present study intends to identify the most significant factors of operational losses and their influencing level with special reference to Indian Banking Industry, to establish a framework to standardize one or more causal risk factors, to analyze its impact on the loss estimate and finally aspires to conduct an extended research to frame a model to minimize operational losses. After collecting data from 362 bank employees from all four regions of India through questionnaire survey and personal interviews of the chief risk officers, heads of operational risk and other operational risk practitioners at financial services firms, including banks, insurers and asset managers. Principal Component Analysis with Varimax rotation is conducted on 10 items; Reliability Analysis has been done with the help of Cronbach Alpha to check the Test Reliability. Multiple Regression Analysis has been used to identify influence level of those influencing factors and to frame an equation on the basis of the same. Bayesian Probabilistic Network is performed to establish a framework to calibrate one or more causal risk factors and analyze its impact on the loss estimate; and to conduct an extended research to frame a model to minimize operational losses.