ANALYZING DOMINANT RISK(S) TOWARDS TOTAL POTENTIALLY ACTUAL LOSS IN BUSINESS ACTIVITIES BANK OF CHINA IN INDONESIA MARKET

Abstract

This research is aimed to identify the dominant risk(s) that affect the total potential actual loss business activities of Chinese banks in Indonesia market. Since there are only few banks which are Chinese Wholly-owned banks, such as Bank of China Jakarta Branch. The researcher tries to find out what are the dominant risk(s) that affect the business activities of Chinese banks. The research is conducted in Jakarta in Indonesia. This research is a case study of Bank of China Jakarta Branch which is supported by Basel Accords and Economic Capital Theory about risk management in banking sector. This study is a quantitative research. The researcher directly finds the secondary data and analyzed the data with multiple regression model based on the statistics. The researcher uses F test to identify the level of significance between the independent variable and dependent variable. The researcher also uses T test to identify which risk factor has highest significance with the dependent variable, which is unexpected loss. The research has found that operational risk is the dominant risk that affects the business activities of Chinese Wholly-owned banks in Indonesia market. The researcher found that all of the independent variables (Credit Risk, Market Risk, Operational Risk and Compliance Risk) have correlation with dependent variable (Unexpected Loss). In addition, the research found that the operational risk has a positive relationship with the unexpected loss of the bank with the highest significance 0.017. The researcher recommends that the Chinese Wholly-owned banks should pay attention to operational risk when conducting its business with customers in Indonesia market. Meanwhile, they cannot ignore other risks, too.