M&a in Financiall Market

mergers and acquisitions

In recent decades, various studies have shown that the financial markets industry has undergone immense changes due to globalization, increasing mergers and acquisitions, advances in information technology and telecommunication (Hussain, 2000). According to Amanat Hussain (2000), risk management is always seen as an ‘intergral part of financial activity’; it was not until the 1990s, when risk management has become itself ‘a key function within banks and other financial institutions’. Nowadays, risk management has become the key discipline within the financial sectors (2). While market and credit is always the key of risk management, organization should not neglected the essentialness of operational risk management which includes the recruitment of relevant skills and expertise staff, technical and organizational infrastructure and an effective monitoring and control systems ( ibid: 5). Amanat Hussain further mentioned that it was the collapse of Barings, the major losses at Metallgesellchaft’s Energy Group, Orange Country, Diawa Bank and Sumitomos head copper trader which demonstrated that there is a need for the organizations to ‘broaden the scope of their risk management activity from merely looking at market and credit risk’ (ibid: 5). Accordingly, it is essential for organizations to efficiently manage their operational risk, which includes the organisation’s policies, culture, procedures, expertise and systems that is required to manage the risks resulting from its financial transactions.

As defined by the European Commissio’s Directive 2006/48/EC, operational risk is

‘the risk of loss resulting fro inadequate of failed internal processes, people and systems or from external events, and includes legal risk’ (Oesterreichische Nationalbank: 9)

By definition, operational risk management is

‘a decision-making tool to systematically help identify operational risks and benefits and determine the best courses of action for any given...