The risk management process is all about identifying exposures to risks, measuring those exposures and making a decision on how to protect the business from the risks (Kidwell et al., 2016). There are several risks that a bank is exposed to that could impact its organizational strategy
Introduction Risk management is a continuous process that includes different phases such as establishing scope and boundaries, risk assessment, risk mitigation, risk acceptance and communication and monitoring. The parts of communication and monitoring interacts with all the phase of risk management. Risk management as a whole includes identification of potential threat and vulnerabilities and the chances of their occurrence, it also determine the level of acceptable risk. Risk identification involves identification and documentation of existing and potential sources of risks to asset. In risk management their two source of risk which are Threats and Vulnerabilities.
Key Bank Risks There are several bank risks and literature concludes that the risks associated with the provision of banking services differ by the type of service rendered. Different authors like () have grouped these risks in various ways to develop the frameworks for their analyses but the common ones which are considered in this study are credit risk, market risks (which includes liquidity risk, interest rate risk and foreign exchange risk), operational risks which sometimes include legal risk, and more recently, strategic risk. 2.4.1 Credit Risk Greuning and Bratanovic (2009) define credit risk as ‘the chance that a debtor or issuer of a financial instrument— whether an individual, a company, or a country— will not repay principal and
The assets of banks and grouped in five categories according to their credit risk, carrying set risk weights of 0%(Cash, Bullion, Home Country Debt Like Treasuries), 10, 20, 50 and 100% and no rating. Banks that operate in the international platform have a minimum capital requirement equal to 8% of their risk-weighted assets. At least, 4% in Tier I Capital (common stock + disclosed reserves) and more than 8% in Tier I
to regulate and make the standards of bank control operations more realistic, increasing the banks financial positions has increased the interest of banks boards of directors and made appropriate financial decisions , banks capital more effective in the control , because of the agreed style of components and elements of financial institutions , everyone has the ability to create a quick idea . criteria for obtaining a safety degree are applied to reduce risk , disadvantages , not to control , bring workers animate experience weak , the presence of tension and conflict because of participating with others , lack of production due to differences vision in teamwork , as for the disadvantages first than , The balance between risk and return leads to an increase in the price of securities and reduces the cost of capital . second , Leads to greater variation in the distribution of incomes and wealth. third , The emergence of continuous economic fluctuations . fourth , Use the exorbitant money to advertise and advertise in order to promote goods and they actually do not express the truth .
It measures the ability of a bank to meet its obligations and how liquid a bank is. In other words, bank liquidity refers to the ability to fund increases in assets and meet obligations as they fall due (Lartey, Antwi, and Boadi, 2013). This ratio cannot be either too high or too low. If it is too high, there is higher possibility that the banks may not have enough liquidity to cover its debts. If it is too low, the banks might not gain as much profit as they could be.
The first step in the risk management process is to identify all major and minor loss exposures. This step involves a painstaking review of all potential losses. Important loss exposures include property, liability, business income, human resources, crime, employee benefit, foreign, intangible property loss exposures and so on. A risk manager can use several sources of information to identify the preceding loss exposures. They include risk analysis questionnaire, physical inspection, flowcharts, financial statement and historical loss data.
Risk management attempts to recognize and manage potential and unforeseen trouble spots that may occur when the project is implemented (Erik W. Larson). So Risk management will be used to attempt to prevent destabilization of the project when unforeseen events occur. Managing risks on projects is a process that includes risk assessment and a mitigation strategy for those risks (Hillson,
Liquidity risk arises from a banks inability to meet its obligations, when it comes to pay without incurring any unacceptable losses. Liquidity risk always affect negatively on banking performance. Author claim is valid through different evidence. He ensure that risk from research methodology which include “Journals, Books, Annual Reports and unstructured interviews” from risk managers of different 22 banks from the period of 2004-2009. Pakistan banking system is a key engine of economic growth and main lender of public and private sectors.