Operational Risk Prevention Strategies in Zimbabwean Commercial Banking from a Financial Audit Perspective

Operational risk is a major cause of losses and instability for commercial banks, especially in developing countries where macroeconomic fluctuations and uncertain regulations can create weak governance and internal controls. From the perspective of auditing, this study will examine operational risk prevention methods for banks in Zimbabwe, using Zimbabwe Commercial Bank (ZCB) as a case example. This paper will also look at the different ways operational risk can arise, present a method of evaluating operational risk based on a correlation between key risk indicators (KRI) and actual audit evidence, and will apply a Loss Distribution Method (LDA) using Monte Carlo Simulations for early warning thresholds based on Value at Risk (Var) or tail risk measures. The research demonstrates a strongly right-skewed loss distribution where rare events produce extreme losses, stressing the need for audit-driven controls testing, ongoing monitoring, and disciplined remediation of audit results. As such, several practical recommendations are made concerning strengthening internal controls, aligning audit plan with risk signals, and enhancing the operational resilience of Zimbabwe's banking sector.