BRANCH OPERATIONS: VERIFICATION, GOVERNANCE AND RISK MANAGEMENT IN BANKING

Abstract

The current banking branch network operates under a significant paradigm shift, balancing required digitalisation with targeted reduction of physical infrastructure. This two-fold transformation entails implementing a sophisticated technique for controlling operational risk (ORM) and ensuring operational resilience. In a decentralised branch environment with high transactional complexity, operational risk, defined as the risk of loss caused by inadequate or failed internal processes, people, and systems, as well as external events, increases. This study proposes an integrated governance framework based on the well-known Three Lines of Defence (3LoD) model and in accordance with local regulatory obligations, such as the Reserve Bank of India's updated Guidance Note on Operational Risk Management and Operational Resilience. The method emphasises the significance of merging current verification technologies (e.g., real-time eKYC and biometrics) with fundamental internal controls such as Dual Control policies. The study establishes measurable Key Risk Indicators (KRIs) and Key Performance Indicators (KPIs) for continuously assessing control efficacy, establishing unambiguous accountability throughout the 3LoD framework, and successfully decreasing external and internal fraud risks.