Risk management is a significant component in the banking operation. It controls the entire management of a bank and if anything goes wrong, it plays a role of preventing from programs. The case “Risk Management at Wellfleet Bank: All That Glitters Is Not Gold” introduces the history, operations, strategy and risk management function of Wellfleet Bank with some detailed proposals. Since there are always some risks within any corporation, this essay will refer to some risks that Wellfleet is faced with, explain why they exist and how to improve these problems.
Risks
According to the Wellfleet’s strategy, credit risk, foreign exchange risk, liquidity risk and sovereign risk can be appearing in the bank.
Credit Risk
Credit risk is “the risk that promised cash flows on loans …show more content…
The flagship of Wellfleet is corporate lending business focusing on large scale deals so that the volume of business proposals has increased sharply, in the mean time, Credit risk occurs in every corporation or bank even if it has no large-volume or large-credit proposal, thus, Wellfleet has no doubt deep the risk since there are so many proposals with the largest credit reaching $1 billion. Although different individuals or firms have different capacities to repay, large loans may be more likely not to be fully repaid as a result of more losses when defaulting even 1% of borrowings from borrowers for a bank. Financial environment influences the credit risk (Danenas & Gintautas 2012). Even though banks have strict research policies to control applicants for loans, it is only a
Risks
According to the Wellfleet’s strategy, credit risk, foreign exchange risk, liquidity risk and sovereign risk can be appearing in the bank.
Credit Risk
Credit risk is “the risk that promised cash flows on loans …show more content…
The flagship of Wellfleet is corporate lending business focusing on large scale deals so that the volume of business proposals has increased sharply, in the mean time, Credit risk occurs in every corporation or bank even if it has no large-volume or large-credit proposal, thus, Wellfleet has no doubt deep the risk since there are so many proposals with the largest credit reaching $1 billion. Although different individuals or firms have different capacities to repay, large loans may be more likely not to be fully repaid as a result of more losses when defaulting even 1% of borrowings from borrowers for a bank. Financial environment influences the credit risk (Danenas & Gintautas 2012). Even though banks have strict research policies to control applicants for loans, it is only a