Research on affecting factors of operational risk management for commercial bank based on structural equation model

Abstract

Structural equation model (SEM) was employed to analyze the interaction factors that affecting operational risk management (ORM) from questionnaires for commercial banks in the research. Based on lots of international and Chinese documentation and questionnaire, the model was constructed with 20 affecting factors and 4 layers (bank employee, section & sub-branch, head office & branch office and bank conditions). “Bank employee level” is taken as the endogenous latent variable, and other levels are taken as the exogenous latent variables from the research results. According to the modification indices (MI) of the model and the modification corresponding criterion, the model was modified so as to get optimized model. The main innovation includes two parts, one is to design the questionnaire for ORM to get important information, and the other one is to employ SEM to analyze ORM factors.