AURORA’S POST-GRADUATE COLLEGE (MCA)

Accredited by NAAC with‘ A+’ Grade

PROJECT SYNOPSIS

Name of the Student : BADRI ACHYUTH

Course : MBA

Academic Year : 2021-2023

Hall Ticket No : 1325-21-672-072

Title of the Project : FINANCIAL RISK ANALYTICS

NAME OF THE COMPANY: IIFL LIMITED

Name of the Guide :

Date of Submission :

Signature of the Student Signature of the Guide

College Seal
 A

SYNOPSIS ON

FINANCIAL RISK ANALYTICS

AT

IIFL LIMITED

Project Synopsis submitted in partial fulfillment for the award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

By

BADRI ACHYUTH

1325-21-672-072

AURORA’S POST-GRADUATE COLLEGE (MCA)

Accredited with ‘A+’Grade by NAAC

Ramanthapur, Hyderabad – 500 013

(2021-23)

TABLE OF CONTENTS
S. No Description Page No
1 INTRODUCTION 1
1.1 Definition of Expatriate -
1.2 Need for the Study -
1.3 Problem Statement -
1.4 Significance of the Study -
1.5 The Objectives of the Study -
1.6 The Hypotheses of the Study -
1.7 Scope of the study -
2 REVIEW OF LITERATURE
2.1 Theoretical Reviews -
2.2 Articles -
3 RESEARCH METHODOLOGY
3.1 Research Design -
3.2 Sampling Procedure -
3.3 Sample Size -
3.4 Methods of Data Collection -
3.5 Questionnaire Design -
3.6 Reliability test -
3.7 Statistical Tools -
CHAPTERIZATION -
BIBLIOGRAPHY -
 1.1 INTRODUCTION

Financial risk analytics is the process of identifying risks, analyzing them and making

investment decisions based on either accepting, or mitigating them. These can be quantitative

or qualitative risks, and it is the job of a Finance manger to use the available Financial

instruments to hedge a business against them. In banking for instance, the Basel Accords are

a set of regulations adopted by international banks that help to track, report and expose credit,

marketing and operational risks.

There are several different types of Risks that finance mangers need to account for before

proposing investment strategies, and this article covers a few of them in detail.

Financial risk analytics #1: Operational Risk

Operational risk – as defined by the Basel II framework – is the risk of indirect or direct loss

caused by failed or inadequate internal people, system, processes or external events. It

includes other risk types such as security risks, legal risks, fraud, environmental risks and

physical risks (major power failures, infrastructure shutdown etc.). Unlike other types of risk,

Operational risks are not revenue driven, incurred knowingly or capable of being completely

eliminated. As long as people, processes and systems remain imperfect and inefficient, the

risk remains.

However, in terms of Financial risk analytics, Operational risks can be managed to within

acceptable levels of risk tolerance. This is done by determining the costs of proposed

improvements against their benefits.

Foreign Exchange Risk is also known as currency risk, FX risk or exchange rate risk. It is

incurred when a financial transaction is made in a currency other than the operating currency

– which is often the domestic currency – of a business. The risk arises as a result of

unfavourable changes in the exchange rate between the transactional currency and operating

currency.

An aspect of Foreign Exchange Risk is Economic Risk or Forecast Risk; the degree to which

an organisation’s product or market value is affected by unexpected exchange-rate

fluctuations. Businesses whose trade heavily relies on the import and export of goods, or who

have diversified into foreign markets are more susceptible to Foreign Exchange Risk.

Financial risk analytics #3: Credit Risk

Credit risk is the risk that a borrower or client defaults on their debts or outstanding

payments. With borrowed money, in addition to the loss of principal, additional factors such

as loss of interest, increasing collection costs etc., must be taken into account when

establishing the extent of the Credit Risk. Financial analysts use Yield Spreads as a means to

determine Credit Risk levels in a market.

One of the simplest ways of mitigating Credit Risk is to run a credit check on a prospective

client or borrower. Other means is to purchase insurance, hold assets as collateral or have the

debt guaranteed by a third-party. Some methods corporations use to mitigate Credit Risk

arising from non-payment of client dues, is to request for advance payments, payment on

delivery before handover of goods or to not provide any lines of credit until a relationship has

been established.
 Certain aspects of many of the Financial risk analytics standards have come under
criticism for having no measurable improvement on risk even though the confidence in
estimates and decisions in Introduction.

Financial risk analytics is the identification, assessment, and prioritization of risks

followed by coordinated and economical application of resources to minimize, monitor,
and control the probability and/or impact of unfortunate events. Risks can come from
uncertainty in financial markets, project failures, legal liabilities, credit risk, accidents,
natural causes and disasters as well as deliberate attacks from an adversary. Several
Financial risk analytics standards have been developed including the Project Management
Institute, the National Institute of Science and Technology, actuarial societies, and ISO
standards. Methods, definitions and goals vary widely according to whether the Financial
risk analytics method is in the context of project management, security, engineering,
industrial processes, financial portfolios, actuarial assessments, or public health and
safety.

The strategies to manage risk include transferring the risk to another party,
avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the
consequences of a particular risk.

In ideal risk management, a prioritization process is followed whereby the risks

with the greatest loss and the greatest probability of occurring are handled first, and risks
with lower probability of occurrence and lower loss are handled in descending order. In
practice the process can be very difficult, and balancing between risks with a high
probability of occurrence but lower loss versus a risk with high loss but lower probability
of occurrence can often be mishandled.

Intangible Financial risk analytics identifies a new type of a risk that has a 100%
probability of occurring but is ignored by the organization due to a lack of identification
ability. For example, when deficient knowledge is applied to a situation, a knowledge risk
materializes. Relationship risk appears when ineffective collaboration occurs. Process-
engagement risk may be an issue when ineffective operational procedures are applied.
These risks directly reduce the productivity of knowledge workers, decrease cost
effectiveness, profitability, service, quality, reputation, brand value, and earnings quality.
Intangible Financial risk analytics allows Financial risk analytics to create immediate
value from the identification and reduction of risks that reduce productivity.

Financial risk analytics also faces difficulties allocating resources. This is the idea of
opportunity cost. Resources spent on Financial risk analytics could have been spent on
more profitable activities. Again, ideal Financial risk analytics minimizes spending while
maximizing the reduction of the negative effects of risks.

STATEMENT OF PROBLEM
In Indian financial environment investors are facing a lot risk to invest in various financial
instruments. The investment risk can be either reduced or can be transferred. Most of the
times investors try to maximize returns but want minimum risk in their investment. The
present study Enables us to identify the different types of risks and how to minimize them. In
investment avenues it is very important to know about Risk and Returns so that one can have
hassle free investment.

NEED AND SIGNIFANCE OF THE STUDY

 Financial Risk Management is the process of identification, analysis, and

acceptance or mitigation of uncertainty in investment decisions.
 Financial Risk Management is inseparable from return in the investment world.
 A variety of tactics exist to ascertain risk; one of the most common is standard
deviation, a statistical measure of dispersion around a central tendency.
 Beta, also known as market risk, is a measure of the volatility, or systematic risk, of
an individual stock in comparison to the entire market.
 Alpha is a measure of excess return; money managers who employ active strategies
to beat the market are subject to alpha risk.
1.2 OBJECTIVE OF THE STUDY
• To Analyze Risk and the Management of the Firm
• To Research Market Mechanisms and Efficienc
• To Analyze Interest Rate Risk
• To Research Currency Risk
• To Equity and Commodity Price Risk
• To Analyze Controlling Risk
• To Quantifying Financial Risks
• To Research Qualitative Approaches to Risk Assessment

1.3 SCOPE OF THE STUDY

The study reveals all the major aspects of Financial risk analytics and their implications.

Study entangles possible factor for identifying a risk and its type. Research provides metrics
to summarize specific activities in Financial risk analytics which in-turn helps an
organization to identify mitigate and avoid risk. Study covers all the major aspect of
Financial risk analytics in HERO MOTOCORP PVT LTD, and the duration of the study was
45 days.
REVIEW OF LITERETURE
Identification:

After establishing the context, the next step in the process of managing risk is to identify
potential risks. Risks are about events that, when triggered, cause problems. Hence, risk
identification can start with the source of problems, or with the problem itself.

source analysis:

Risk sources may be internal or external to the system that is the target of risk
management. Examples of risk sources are: stakeholders of a project, employees of a
company or the weather over an airport.

Problem analysis:

Risks are related to identify threats. For example: the threat of losing money, the threat of
abuse of privacy information or the threat of accidents and casualties. The threats may
exist with various entities, most important with shareholders, customers and legislative
bodies such as the government.

When either source or problem is known, the events that a source may trigger or the
events that can lead to a problem can be investigated. For example: stakeholders
withdrawing during a project may endanger funding of the project; privacy information
may be stolen by employees even within a closed network; lightning striking a Boeing
747 during takeoff may make all people onboard immediate casualties.

The chosen method of identifying risks may depend on culture, industry practice and
compliance. The identification methods are formed by templates or the development of
templates for identifying source, problem or event. Common risk identification methods
are

Objectives-based risk identification:

Organizations and project teams have objectives. Any event that may endanger achieving
an objective partly or completely is identified as risk.
Scenario-based risk identification in scenario analysis different scenarios is created. The
scenarios may be the alternative ways to achieve an objective, or an analysis of the
interaction of forces in, for example, a market or battle. Any event that triggers an
undesired scenario alternative is identified as risk - see Futures Studies for methodology
used by Futurists.

Taxonomy-based risk identification the taxonomy in taxonomy-based risk identification

is a breakdown of possible risk sources. Based on the taxonomy and knowledge of best
practices, a questionnaire is compiled. The answers to the questions reveal risks.
Taxonomy-based risk identification in software industry can be found in CMU/SEI-93-
TR-6.

Common-risk checking in several industries lists with known risks is available. Each risk
in the list can be checked for application to a particular situation. An example of known
risks in the software industry is the Common Vulnerability and Exposures list found at
http://cve.mitre.org.

Risk charting (risk mapping):

This method combines the above approaches by listing Resources at risk, Threats to those
resources Modifying Factors which may increase or decrease the risk and Consequences
it is wished to avoid. Creating a matrix under these headings enables a variety of
approaches. One can begin with resources and consider the threats they are exposed to
and the consequences of each. Alternatively one can start with the threats and examine
which resources they would affect, or one can begin with the consequences and determine
which combination of threats and resources would be involved to bring them about.
Assessment:

Once risks have been identified, they must then be assessed as to their potential severity
of loss and to the probability of occurrence. These quantities can be either simple to
measure, in the case of the value of a lost building, or impossible to know for sure in the
case of the probability of an unlikely event occurring. Therefore, in the assessment
process it is critical to make the best educated guesses possible in order to properly
prioritize the implementation of the Financial risk analytics plan.

The fundamental difficulty in risk assessment is determining the rate of occurrence since
statistical information is not available on all kinds of past incidents. Furthermore,
evaluating the severity of the consequences (impact) is often quite difficult for immaterial
assets. Asset valuation is another question that needs to be addressed. Thus, best educated
opinions and available statistics are the primary sources of information. Nevertheless, risk
assessment should produce such information for the management of the organization that
the primary risks are easy to understand and that the Financial risk analytics decisions
may be prioritized. Thus, there have been several theories and attempts to quantify risks.
 REVIEW OF LITERATURE

ARTICLES : 1

TITLE: FINANCIAL RISK ANALYTICS

AUTHOR: G. KOTRESHWAR.

YEAR: 25 JAN 2006

ABSTRACT:

“Banks are in the business of managing risk, not avoiding it……….”

risk is the fundamental element that drives financial behavior. without risk, the financial

system would be vastly simplified. however, risk is omnipresent in the real world. financial

institutions, therefore, should manage the risk efficiently to survive in this highly uncertain

world. the future of banking will undoubtedly rest on Financial risk analytics dynamics. only

those banks that have efficient Financial risk analytics system will survive in the market in

the long run. the effective management of credit risk is a critical component of

comprehensive Financial risk analytics essential for long-term success of a banking

institution.
ARTICLE : 2

TITLE: FINANCIAL RISK ANALYTICS IN FINANCIAL INSTITUTIONS

AUTHOR: ADRIANO A. RAMPINI.

YEAR: 17 OCT 2017.

ABSTRACT:

We study Financial risk analytics in financial institutions using data on hedging of interest

rate and foreign exchange risk. We find strong evidence that better capitalized institutions

hedge more both in the cross-section and within institutions over time for identification, we

exploit net worth shocks resulting from loan losses due to drops in house prices institutions

that sustain such losses reduce hedging substantially relative to otherwise similar institutions.

The evidence is consistent with the theory that financial constraints impede both financing

and hedging. We find no evidence that risk shifting, changes in interest rate risk exposures, or

regulatory capital explain hedging behavior.

ARTICLE : 3

TITLE: TRUST-LEVEL RISK EVALUATION AND RISK CONTROL GUIDANCE IN

THE NHS EAST OF ENGLAND

AUTHOR: ALAN J. CARD

YEAR: DECEMBER 2013

ABSTRACT:

In recent years, the healthcare sector has adopted the use of operational risk assessment tools

to help understand the systems issues that lead to patient safety incidents. but although these

problems-focused tools have improved the ability of healthcare organizations to identify

hazards, they have not translated into measurable improvements in patient safety. one

possible reason for this is a lack of support for the solution-focused process of risk control.

this article describes a content analysis of the Financial risk analytics strategies, policies, and

procedures at ali acute (i.e., hospital), mental health, and ambulance trusts (health service

organization) in the east of england area of the british nation health service. the primary goal

was to determine what organization-level guidance exists to support risk control practice. a

secondary goal was to examine the risk evaluation guidance provided by these trusts. with

regard to risk control, we found an almost complete lack of useful guidance to promote good

practice. with regard to risk evaluation, the trusts relied exclusively on risk matrices. a

number of weaknesses were found in the use of this tool, especially related to the guidance

for scoring an event’s likelihood. we make a number of recommendations to address these

concerns. the guidance assessed provides insufficient support for risk control.
ARTICLE : 4

TITLE: A STUDY ON BANK FAILURES WHERE CAUSED BY RISK MANAGEMENT

AUTHOR: BROWNBRIDGE

JOURNAL: A JOURNAL ON BANK FAILURES WHERE CAUSED BY RISK

MANAGEMENT

ABSTRACT:

According to a study by Brownbridge (2098), most of the bank failures were caused by

fixed assets management. Arrears affecting more than half the loan risk managements were

typical of the failed banks. Many of the bad debts were attributable to moral hazard: the

adverse incentives on bank owners to adopt imprudent lending strategies, in particular insider

lending and lending at high interest rates to borrowers in the riskiest segments of the credit

markets.
ARTICLE : 5

TITLE: A STUDY OF A WRONG ECONOMIC DECISION TAKEN BY INDIVIDUALS

AUTHOR: BLOEM AND GORTER

JOURNAL: A JOURNAL ON THE FINANCIAL RISK ANALYTICS IN INDIAN

BANKING SYSTEM

ABSTRACT:

Bloom and Gorter (2001) suggested that a more or less predictable level of fixed assets

management, though it may vary slightly from year to year, is caused by an inevitable

number of ‘wrong economic decisions by individuals and plain bad luck (inclement weather,

unexpected price changes for certain products, etc.). Under such circumstances, the holders of

loans can make an allowance for a normal share of non-performance in the form of bad loan

provisions, or they may spread the risk by taking out insurance. Enterprises may well be able

to pass a large portion of these costs to customers in the form of higher prices. For instance,

the interest margin applied by financial institutions will include a premium for the risk of

nonperformance on granted loans.

At this time, banks’ fixed assets management increase, profits decline and substantial losses

to capital may become apparent. Eventually, the economy reaches a trough and turns towards

a new expansionary phase, as a result the risk of future losses reaches a low point, even

though banks may still appear relatively unhealthy at this stage in the cycle.
ARTICLE : 6

TITLE: A STUDY OF ALLOWANCE OF NORMAL SHARE TO THE HOLDERS OF

LOAN

AUTHOR: BLOEM AND GORTER

JOURNAL: A JOURNAL ON THE CAUSES OF MAKING OF POOR FINANCIAL

RISK ANALYTICS CITED BY 4 RELATED ARTICLES

ABSTRACT:

According to Gorter and Bloem (2002) fixed assets management are mainly caused by an

inevitable number of wrong economic decisions by individuals and plain bad luck (inclement

weather, unexpected price changes for certain products, etc.). Under such circumstances, the

holders of loans can make an allowance for a normal share of nonperformance in the form of

bad loan provisions, or they may spread the risk by taking out insurance.
ARTICLE : 7

TITLE: A STUDY ON FINANCIAL RISK ANALYTICS DURING THE

LIBERALIZATION PERIOD

AUTHOR: PETYAKOEVA

JOURNAL: A JOURNAL ON THE PAPER PROVIDES NEW EMPIRICAL EVIDENCE

ON THE IMPACT OF FINANCIAL LIBERALIZATION ON THE PERFORMANCE OF

INDIAN COMMERCIAL BANKS SEP 30 SOURCE: REPEC

ABSTRACT:

PetyaKoeva (2003), his study on the Performance of Indian Banks. During Financial

Liberalization states that new empirical evidence on the impact of financial liberalization on

the performance of Indian commercial banks. The analysis focuses on examining the

behavior and determinants of bank intermediation costs and profitability during the

liberalization period. The empirical results suggest that ownership type has a significant

effect on some performance indicators and that the observed increase in competition during

financial liberalization has been associated with lower intermediation costs and profitability

of the Indian banks.

ARTICLE : 8

TITLE: THE DESCRIPTION OF RISK MANAGEMENTS

AUTHOUR: RICHARD GRINOLD

PUBLISHING YEAR: 2004

ABSTRACT:

grinold provides a general framework for the description of various aspects of a Financial risk

analytics using a set of factors. the work is cousin to the well – worn topic of performance

analysis and attribution, and in that sense, is fairly represented as being old wine in new

bottles the scope is much more general, however. grinold first provides a theoretical structure

with a model that describes various aspects of a Financial risk analytics as either the

allocation of a risk management’s variance or as the results in terms of the risk and

correlation of risk managements. the expanded framework and Financial risk analytics focus

opens up a wide range of problems that can be studied with the same framework. grinold uses

exampled to illustrate what the methodology can accomplish and as a guide to sense when we

are asking too much from the model.

RESEARCH METHODOLOGY

The process of research work done the present project works is

“A STUDY ON FINANCIAL RISK ANALYTICS” in this project the methodology

adopted is two.

 Data collection.

 Data analysis.

1. Data collection:

Data means the information regarding the topic so researched this can be done using two
sources.

 Primary data: The data is gathered by the interaction with field of IIFL
LIMITED.
 Secondary data: The information gathered from all ready available sources
such as internet, books, financial reports this project work has been done
using some of the web sites and financial details of the company.

2. Data analysis:

Data analysis is the time series analysis where tables and graphs have been used to analysis
the data the following formulas has been applied.

Source of data

Primary Sources: The primary data was collected through structured unbiased questionnaire
and personal interviews of investors. For this purpose questionnaire included were both open
ended & close ended & multiple-choice questions.
Secondary method: The secondary data collection method includes:

 Websites
 Journals
 Text books
Method Used For Analysis of Study

The methodology used for this purpose is Survey and Questionnaire Method. It is a time
consuming and expensive method and requires more administrative planning and supervision.
It is also subjective to interviewer bias or distortion.

Sample Size: 100 respondents

Sampling Unit: Businessmen, Government Servant, Retired Individuals

Statistical Tools: MS-excel and SPSS are used to analyze the data.
1.5 LIMITATIONS OF THE STUDY

1. To do the project the time given is not sufficient.

2. The data on which the project done is completely not reliable.
3. The data available is not sufficient to do the project.
4. The area covered under this project is very limited on the basis of which the
inference can be made.
5. The opening price of future value and closing price of future value has taken for
calculation.

.
 PROPOSED OUT COMES

Normally investors think that any investment whose risk is high will have more returns

and vice versa. But these days the stocks are not following any such trends. This present

project has been undertaken to identify the opportunities available in the stock markets. In

terms of risk and return, the investments will be evaluated. The main aim of investor is to

have safety to his investment first and then returns after that no risk or less risk. The

present project work shows that the company’s returns are not following any trends but

very volatile. This can be because of the volatile stock market conditions like fluctuations

in interest rate, Inflation, Foreign institutional investors etc., this project can be concluded

as an attempt to identify the stocks with more returns and if these have high risk. The

measures for reducing the or to transfer the risk.

 CHAPTERISATION

CHAPTER -1 - INTRODUCTION

This chapter includes the introduction of the topic, need, scope, objectives of the study,

Project limitations and methodology of the study.

CHAPTER - 2 REVIEW OF LITERATURE

This chapter includes the theoretical background and articles written by different authors and

brief explanation of the topic.

CHAPTER - 3 - INDUSTRY PROFILE & COMPANY PROFILE

CHAPTER - 4 - DATA ANALYSIS AND INTERPRETATION

CHAPTER - 5 – SUMMARY AND CONCLUSION

This chapter includes the overall summary of the project and the conclusion based on the

study during the period.

 BIBLIOGRAPHY

Books referred:

1. Ranganatha, R,Madhumathi Investment Analysis and Portfolio

Management, Pvt.Ltd., 3 Edition by Dorling Kindersley (India).

rd

2. Prasanna Chandra Investment Analysis and Portfolio Management,

3. V.A.Avadhani, Security Analysis and Portfolio Management, Pvt.Ltd

4. Punithavathi Pandian Security Analysis and Portfolio Management, 8th

Edition published by Mc Graw-Hill.

5. Levin R,I, Rubin David, “statistics for management”.

6. Arora PN and others complete” statistical methods” ,2010 Ed.S.Chand.

7. Keller, G, “ Statistics for management”, 2009, 1 Ed, Cengage Learning.

st

Website

www.hero.com

WWW. Investopedia.com

www.nseindia.com

www.bseindia.com.

www.dbfs securities .com

Newspaper & magazine

DAIRY NEWS PAPERS.

ECONOMIC TIME, FINANCIAL EXPRESS.ETC