Question

how risk management relate to your industry and how does it minimize the risk?

Answer 1

Related Industry :- Banking

Risk Management:-

Risk: - Risk related to banks is financial risk. Financial risk means loss of investment or loss of expected return on investment.

Management of Risk: - Risk Management means taken appropriate action on the risk assessed by the fund provider like Mortgage of assets, high interest rates etc.

Techniques to Measure Risk

1. Beta: - Measurement of systematic risk. Systematic risk is related with uncontrollable market condition.
2. Standard Deviation: - Deviation from expected return.
3. Value at Risk: -Statistical method of measurement of investment value can be lost.

Risk faced by banks recently

1. Operation Related Risk: - Banks nowadays requires performing various operations which carries various risk.
2. Credit risk of borrower :- Default by borrower against payment of debt and interest
3. Market Related Risk:- Amount invested by bank is market face equity related risk, Interest rate risk, foreign exchange risk etc.
4. Liquidity related Risk :- Demand and supply of fund is required to measure by bank.
5. Other Risk- like Business Related Risk etc.

Risk management action taken by Banks to minimize the risk :- Following action taken by banks to manage risk.

1. Hedging techniques: - By hedging banks can reduce their future losses.
2. Diversification of assets: - By diversification of assets risk can be reduced.
3. Collateral securities: - Collateral securities can be a better tool to control risk.
4. Personal Guarantees: -Guarantees provided by personals can also reduce risk.
5. Fulfilling KYC Norms: - KYC norms meeting can also reduce risk at considerable level.
6. Better decision making: -Decision of banks should be sound.
7. Making good strategies: - Good strategies can also be helpful to mitigate risk.
8. Supervision over debt provided :- Debt supervision is must
9. Better Data management:- Banks focused on better data management so that they control debt in better ways.
10. Other –like hiring of experts, use of advance techniques and better internal control.