Climate Change on Operational Risk: A Review and Policy Implications for Commercial Banks in Vietnam

This paper examines the impact of climate change on operational risk in Vietnam’s commercial banking system from a theoretical review and policy-oriented perspective. It argues that climate-related risks do not constitute a standalone risk category but rather act as an amplifier of traditional banking risks, particularly operational risk. The study identifies primary transmission channels through which climate change affects operational risk: infrastructure and business continuity, IT and cybersecurity, human resources and internal processes, legal and reputational factors, and third-party dependencies. In the context of Vietnam—a highly climate-vulnerable country, the article highlights that commercial banks operate under high levels of climate exposure, while frameworks for managing climate-related operational risk remain at an early stage of development. Based on this assessment, the paper proposes six key policy recommendations, including the integration of climate risk into operational risk management frameworks, the standardization of climate-related data, and the development of a structured roadmap for climate risk disclosure. The findings contribute to the growing literature on climate risk in banking and provide practical implications for regulators and financial institutions in emerging markets.