Risk Management in Banking

In: Business and Management

Submitted By ashokr1
Words 9309
Pages 38
CHAPTER I:

INTRODUCTION

1. THEME OF THE STUDY

Risk management underscores the fact that the survival of an organization depends heavily on its capabilities to anticipate and prepare for the change rather than just waiting for the change and react to it. The objective of risk management is not to prohibit or prevent risk taking activity, but to ensure that the risks are consciously taken with full knowledge, purpose and clear understanding so that it can be measured and mitigated. It also prevents an institution from suffering unacceptable loss causing an institution to suffer or materially damage its competitive position. Functions of risk management should actually be bank specific dictated by the size and quality of balance sheet, complexity of functions, technical/ professional manpower and the status of MIS in place in that bank.

1.2 INTRODUCTION

Risk: the meaning of ‘Risk’ as per Webster’s comprehensive dictionary is “a chance of encountering harm or loss, hazard, danger” or “to expose to a chance of injury or loss”. Thus, something that has potential to cause harm or loss to one or more planned objectives is called Risk.
The word risk is derived from an Italian word “Risicare” which means “To Dare”. It is an expression of danger of an adverse deviation in the actual result from any expected result.
Banks for International Settlement (BIS) has defined it as- “Risk is the threat that an event or action will adversely affect an organization’s ability to achieve its objectives and successfully execute its strategies.”
Risk Management: Risk Management is a planned method of dealing with the potential loss or damage. It is an ongoing process of risk appraisal through various methods and tools which continuously

• Assess what could go wrong • Determine which risks are important to deal with • Implement strategies to deal with…...

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