Estimation of Maximum Potential Losses for Digital Banking Transaction Risks Using the Extreme Value-at-Risks Method

The application of industry 4.0 in banking presents many challenges, with several operational risks related to downtime and timeout services due to system failures. One of the operational risk management steps is to estimate the value of the maximum potential losses. The purpose of this study is to estimate the maximum potential losses for digital banking transaction risks. The method used for estimating risks is the EVaR method. There are several steps in this study. The first step is to resample the data using MEBoot. This process is a simulation of the operational risk loss data of digital banking. Next, the threshold value is determined to obtain the extreme data value. Then, a Kolmogorov–Smirnov test is conducted to fit the data with the GPD. Afterward, the GPD parameter is estimated. Then, EVaR is calculated using a portfolio approach to obtain a combination of risk values as maximum potential losses. The analysis results show that the maximum potential loss is IDR144,357,528,750.94. The research results imply that the banks need to pay attention to the maximum potential losses of digital financial transactions as a reference for risk management. Therefore, banks can anticipate the adequacy of reserve funds for these potential risks.

Introduction to this special section: Seismic acquisition

In the life cycle of a seismic product, the lion's share of the budget and personnel hours is spent on acquisition. In most modern seismic surveys, acquisition involves hundreds of specialized personnel working for months or years. Seismic acquisition also must overcome potential liabilities and health, safety, and environmental concerns that rival facility, pipeline, construction, and other operational risks. As only properly acquired data can contribute effectively to processing and interpretation strategies, a great deal of importance is placed on acquisition quality. Arguably, many of the advances the seismic industry has experienced find their origin arising from advances in acquisition techniques. Full-waveform inversion (FWI), for example, can reach its full potential only when seismic acquisition has provided both low frequencies and long offsets.

Sustainability of cryptocurrency in blockchain technology for business development in African Countries

The aim of the paper is to analyze the sustainability of cryptocurrency in blockchain technology in African countries for securing financial business transactions. Following the subprime crisis that shook the world economy, a new perception of money has emerged. It is a fully digital currency whose transactions are made through a distributed network. This algorithm-encrypted currency, reputed to be tamper-proof, transparent and inclusive, relies on a distributed network called the Blockchain. By comparison with traditional registers in which operations are paginated and successively recorded, transactions in blockchain technology are aggregated within the chain of blocks. It is decentralized since it is replicated on several geographic sites around the world. It enables peer-to-peer transactions, automated in real-time, reliable, secure, without intermediaries and non-repudiable. To ensure maximum security during financial transactions, blockchain miners use cryptography. This distributed system is, therefore, a major technological innovation capable of securing the financial infrastructure and mitigating failures by reducing operational risks. According to our analysis based on the Merkle tree model and blockchain energy consumption, the sustainability of cryptocurrency is a major issue for developing countries. Especially in Africa, its practicality poses a number of constraints.

GENERATION DISPARITIES ON THE PERCEPTION OF SMEs BUSINESS RISKS

This article aims to identify common features, disparities, and consequences in the perception of business risks between generation X, Y, and Z entrepreneurs in the segment of small and medium-sized enterprises (SMEs). The empirical part of this research included the dataset of 1585 questionnaires fulfilled by the entrepreneurs from the SME segment from four Central European countries across 2019-2020. The disparities of the perception of business risks were analyzed using Chi-square and Kruskal-Wallis tests. The research results prove the existence of the significant disparities in the perception of the market, financial, personnel, legal, and operational risks sources by the entrepreneurs from X, Y, and Z generations. Generally, essential disparities are in the perception of business risks between generation X and Z. 61.7% of SMEs from generation X believe that the number of possible requests for the specific products/services has a downward trend. In comparison, only 49.0% of SMEs from generation Z and 45.3% of SMEs from generation Y present the same opinion. The presented research results have the following implications: i. top management of SMEs should improve interpersonal relationships in the workplace; ii. fine-tuning of supporting programs by organizations supporting the business environment in the region of the Visegrad Group; iii. preparation of strategic documents dealing with the quality of the business environment or the training of top SME managers in the case of national policymakers.

The analysis of drivers of operational risks in Nigerian commercial banks

Despite the institutionalization of operational risk management in banks and the strict supervision of bank regulators, operational risk events are still on the increase. It is becoming evident to banks that there is a need to identify the drivers of this risk and nib it at the root to reduce the probability of recurrence. Hence, this study examined the drivers of operational risks in Nigerian commercial banks and the extent to which each driver contributes to operational risk. To achieve the study’s objectives, primary data were collected from the Operational Risk Management Desks of six (6) sampled commercial banks and analyzed using SPSS and Microsoft Excel. The result showed that Internal processes, IT systems and Quality of Risk Officers are determinants of operational losses in banks. The internal process was however indicated as having the most impact. The study concluded that Internal Process is the major driver of operational risk in Nigerian Commercial banks. The researcher, therefore, recommends that bank management must have defined procedures for core activities and prioritize regular review of their critical processes to reduce operational risk events and the associated costs.

Successful Approach in Curing Lost Circulation in Depleted Aquifer Formations by Utilizing a Combination of Swelling Polymer & a Shear-Rate Rheology-Dependent Cement System; Case Study in UAE Land Operation

One of the greatest historically unsolved challenges to date in the United Arab Emirates is the failure to effectively cure the severe losses due to poor zonal isolation during drilling and cementing aquifer formations in particular the Dammam, UER & Simsima formations in the BAB field. Continuous efforts have been made to seek and pilot new technologies in UAE land operations to overcome drilling operation challenges, specifically chronic lost circulation in aquifer formations with the commitment to drive a more cost-effective operation and reduce the risk of Non-Productive Time (NPT). The current practice was not providing proper zonal isolation in the surface and intermediate sections. Most of the time aerated drilling was utilized while drilling the lost zones and conduct a top-up cement job to improve zonal isolation, but this results in limited reliability. It was necessary to identify a different approach to cure or significantly reduce the losses which would enable the hole section to be drilled successfully while minimizing operational risks, in a cost-effective manner. A technique combining two different technologies was selected: a swelling polymer lost-circulation material (LCM) that hydrates and helps reduce flow velocity into the formation, followed by a shear-rate rheology-dependent cement system. This cement system is a tunable and tailored slurry with thixotropic properties and has shown very cost-effective results with high success rates. It was then decided to tailor this approach to Abu Dhabi land operations to maximize wellbore asset value. After four subsequent trials targeting two different aquifer formations, the technique has shown tremendously promising results by successfully curing the losses providing above 80% returns. These combined technologies aim to eliminate or reduce effect of losses during cementing by performing the primary cementing job with complete returns or minor losses across aquifers thus enhancing wellbore integrity during the lifecycle of the well. It is hoped that this will eliminate, or at a minimum reduce production deferrals and subsequently improve plug and abandon (P&A) operations at end of field life. This paper aims to describe the challenges faced on the first three trials utilizing this technique and the solutions assigned for each trial based on the inputs, such as loss rate, formations interval exposed, design and lab testing for the pumped treatments as well as job execution details along with lesson learned for future jobs.

Calculating capital requirements for operational risk

Operational risks have become increasingly important for banks, especially against the background of growing IT dependency and the increasing complexity of their activities. Further-more, the corona pandemic contributed to the increased risk potential. Therefore, banks have to back these risks with own funds. There are currently three measurement approaches for determining the capital requirements for operational risk. In recent years, and especially during the Great Financial Crisis of 2007/2008, however, some of the weaknesses inherent in these approaches have become apparent. Thus, the Basel Committee on Banking Supervision revised the current capital framework. Therefore, this article examines the various measurement approaches, addresses inherent weaknesses and moreover, presents the future measurement approach developed by the supervisory authorities.