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    Risk Management in Banks

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    saurabh nadgire
    Risk management in banks is important to address credit risk, market risk, and operational risk. Credit risk arises from borrower default and is managed through credit risk strategies approved by the board. Market risk includes liquidity risk, interest rate risk, exchange rate risk, and hedging risk, which the bank addresses through an asset-liability management committee. Operational risk arises from errors and failures in systems, people, and processes and is mitigated by techniques to measure, monitor, and control operational risk levels.

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    Risk Management in Banks

    Uploaded by

    saurabh nadgire
    68 views10 pages
    Risk management in banks is important to address credit risk, market risk, and operational risk. Credit risk arises from borrower default and is managed through credit risk strategies approved by the board. Market risk includes liquidity risk, interest rate risk, exchange rate risk, and hedging risk, which the bank addresses through an asset-liability management committee. Operational risk arises from errors and failures in systems, people, and processes and is mitigated by techniques to measure, monitor, and control operational risk levels.

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    Risk management in banks is important to address credit risk, market risk, and operational risk. Credit risk arises from borrower default and is managed through credit risk strategies approved by the board. Market risk includes liquidity risk, interest rate risk, exchange rate risk, and hedging risk, which the bank addresses through an asset-liability management committee. Operational risk arises from errors and failures in systems, people, and processes and is mitigated by techniques to measure, monitor, and control operational risk levels.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    68 views10 pages

    Risk Management in Banks

    Uploaded by

    saurabh nadgire
    Risk management in banks is important to address credit risk, market risk, and operational risk. Credit risk arises from borrower default and is managed through credit risk strategies approved by the board. Market risk includes liquidity risk, interest rate risk, exchange rate risk, and hedging risk, which the bank addresses through an asset-liability management committee. Operational risk arises from errors and failures in systems, people, and processes and is mitigated by techniques to measure, monitor, and control operational risk levels.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 10

    Risk

    Management
    In Banks
    DISCUSSIO
    N OUTLIN
    E
     What is Risk Management
     Importance of Risk Management
     Credit Risk Management
     Market Risk Management
     Operational Risk Management
    WHAT IS RISK
    The forecasting and?
    MANAGEMENT evaluation of
    financial risks together with the
    identification of procedures to avoid or
    minimize their impact

    Risk Management Process -

    Identify Assess Control Review


    the Risk the Risk Risk Control
    Credit Risk
    Management

    Market Risk
    Management

    Types of Risk
    Management
    Operational Risk
    Management
     Credit Risk is the risk or potential of loss that may
    occur due to failure of borrower to meet the
    obligation on agreed terms and condition of
    financial contracts.

     Internal and External factors both Credit Risk of


    bank portfolio.

     Credit Risk includes –


    1. Loans
    2. Internet Transactions
    3. Derivatives
    4. Acceptances
    Best practices to manage this Risk

     Each bank should develop, with the approval of its


    Board, its own credit risk strategy or plan

     They include a statement of the bank’s willingness to grant


    loans based on the type of economic activity, geographical
    location, currency, market, maturity and anticipated
    profitability.

     They take into account the cyclical aspects of the


    economy and the resulting shifts in the composition/
    quality of the overall credit portfolio.

     Senior management of a bank shall be responsible for


    implementing the credit risk strategy approved by the
    Board.
    Market risk Comprises of Liquidity risk, Exchange
    rate risk, Interest rate risk and Hedging risk.

     Liquidity risk is the potential inability to meet the


    liabilities as they become due. It arises when the
    banks are unable to generate cash to cope with a
    decline in deposits or increase in assets.
    The possibility of loss to the Bank
    caused by changes in market variables  Interest Rate Risk - Interest rate risk is the risk
    such as Interest rate, foreign exchange, where changes in market interest rates might
    commodities and equities and prices of adversely affect a bank’s financial condition.
    securities etc.
     Exchange rate risk, is an unavoidable risk of
    foreign investment.
    Strategies to Manage
    this Risk

    Should make a management


    Top management of the Bank Bank should form asset-
    committee in order to track
    should clearly articulate the liability management
    the market risk on real time
    policies. committee
    basis.
    Operational Risk

     Operational Risks” is a risk that includes


    errors because of the system, human
    intervention, incorrect data, or because of
    other technical problems. Every firm or
    individual has to deal with such an
    operational risk in completing any
    task/delivery.

     Types of Operational Risk –

     Technical Error
     Human Error
     Intentional fraud
     Gap in flow etc.
    Strategies

    Estimating probability of Can use analytical


    Operational loss and also techniques to measure the
    potential size of the loss. operational risk level.

    Should be assessed and Developing enterprise-wise


    generic standards for OR
    reviewed at regular Corporate Governance
    interval standards.

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