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    Risk Management

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    sudarshan1985
    The risk management process consists of defining, measuring, and managing risks. It establishes risk policies, procedures, analysis, review, and oversight approved by senior management and the board. The main risks for banks include credit, settlement, pre-settlement, country, transfer, liquidity, market, interest rate, operational, legal, reputation, and regulatory risks. Risk measurement methodologies must be developed to consistently assess and manage all risks.

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    Risk Management

    Uploaded by

    sudarshan1985
    1K views6 pages
    The risk management process consists of defining, measuring, and managing risks. It establishes risk policies, procedures, analysis, review, and oversight approved by senior management and the board. The main risks for banks include credit, settlement, pre-settlement, country, transfer, liquidity, market, interest rate, operational, legal, reputation, and regulatory risks. Risk measurement methodologies must be developed to consistently assess and manage all risks.

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    The risk management process consists of defining, measuring, and managing risks. It establishes risk policies, procedures, analysis, review, and oversight approved by senior management and the board. The main risks for banks include credit, settlement, pre-settlement, country, transfer, liquidity, market, interest rate, operational, legal, reputation, and regulatory risks. Risk measurement methodologies must be developed to consistently assess and manage all risks.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    1K views6 pages

    Risk Management

    Uploaded by

    sudarshan1985
    The risk management process consists of defining, measuring, and managing risks. It establishes risk policies, procedures, analysis, review, and oversight approved by senior management and the board. The main risks for banks include credit, settlement, pre-settlement, country, transfer, liquidity, market, interest rate, operational, legal, reputation, and regulatory risks. Risk measurement methodologies must be developed to consistently assess and manage all risks.

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    At a glance
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    The document discusses various types of risks faced by banks in their operations and the importance of risk management.

    The main risks discussed are credit risk, settlement risk, pre-settlement risk, country risk, transfer risk, liquidity risk, market liquidity risk, market risk, interest rate risk.

    Operational risk can arise from errors, omissions, system failures or natural disasters. Legal risk also arises if a bank operates without proper legal knowledge or documents.

    Risk Management

    I. The risk management process consists of the


    stages of defining and measuring the risks.

    II. Establishing the risk policies and


    implementation procedures and their
    implementation; and the analysis, review,
    reporting, research, recognition.

    III. Assessment of risks within the framework of


    the basis set by the bank senior management
    and the risk management group together and
    approved by the board of directors.
     
    Types of Risk

    Credit risk: Probability of loss from a Debtor’s default. In banking credit risk is a
    major factor in determination of interest rate of a loan ,longer the term of loan
    higher the interest.

    Settlement risk: The risk that the underlined financial instruments or the funds
    (cash) are not delivered to the bank by the counter party on time.
     
    Pre-settlement risk: the risk that a counter party to an outstanding transaction for
    completion at a future date will fail to perform on the contract or agreement during
    the life of the transaction.

    Country risk: in a cross-border transaction the risk that the borrower will be unable
    to fulfill of his obligations wholly or partly on time due to adverse economic, social
    or political situations in his country.
     
    Transfer risk: The risk that the borrower will be unable to fulfill his obligations on
    payment of his foreign currency denominated debt in original currency or in another
    convertible currency due to legislation or adverse economic situation of his country.
    Types of Risk
    Liquidity risk: The risk of failing to have cash amount or
    cash inflows as a certain level and quality that enables the
    bank to meet its cash outflows fully and on time as a result of
    an imbalance in the cash flow.

    Market liquidity risk: The risk of loss when the bank can
    not exit the market or close out of its open positions in
    sufficient quantities at a reasonable price in a timely manner,
    due to being unable to enter the market appropriately, the
    illiquid market structure for certain products or barriers and
    segmentations in the market.

    Market risk: The risk of loss due to interest rate risk, equity
    risk and foreign exchange risk related to changes in interest
    rates, foreign exchange rates and equity prices in on and off-
    balance sheet positions of banks.
    Types of Risk

     
    Interest rate risk: Depending on the position of the bank, the
    risk of loss that the bank is exposed to due to changes in interest
    rates.
     
    Operational risk: The risk of loss arising from errors and
    omissions caused by breakdowns in the internal controls of the
    bank, the failure of the bank management and personnel to
    perform in a timely manner, or mistakes made by the bank
    management, or breakdowns and failures in the information
    technology system, and events such as major earthquake, major
    fire or flood.
     
    Legal risk: The possibility of the situation where the obligations
    are higher or rights are lower than assumed due to operations
    based on insufficient or incorrect legal knowledge and documents.
    Types of Risk
     Reputation risk: The risk of loss due to bank’s
    diminished creditworthiness and impaired reputation
    resulting from failures in business practices or to
    comply with current laws and regulations.

     Regulatory risk: The risk of loss arising from


    violations and non-conformance with laws and
    regulations and legal obligations.
    Risk measurement

    A Risk measurement methodology which


    is capable of comparing the different
    dimensions of risk and setting the risk
    concept as a criteria for performance
    measurements and raising capital shall be
    developed in order to consistently assess
    and manage the risks that the bank is
    exposed to.

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