Essay about Riskmanagement

8639 Words Mar 4th, 2012 35 Pages
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Essay Sample
MANAGEMENT Risk Management In Banks R.S. Raghavan < E X E C U T I V E S U M M A R Y > ◆Risk is inherent in any walk of life in general and in financial sectors in particular. Till recently, due to regulated environment, banks could not afford to take risks. But of late, banks are exposed to same competition and hence are compeled to encounter various types of financial and non-financial risks. Risks and uncertainties form an integral part of banking which by nature entails taking risks.

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Hence risk is inherent in any walk of life in general and in financial sectors in particular. Of late, banks have grown

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BACKGROUND

he etymology of the word “Risk” can be traced to the Latin word “Rescum” meaning Risk at Sea or that which cuts. Risk is associated with uncertainty and reflected by way of charge on the fundamental/basic i.e. in the case of business it is the Capital, which is the cushion that protects the liability holders of an institution. These risks are inter-dependent and events affecting one area of risk can have ramifications and penetrations for a range of other categories of risks. Foremost thing is to understand the risks run by the bank and to ensure that the risks are properly confronted,



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The author is member of the Institute. The views expressed herein are the personal views of the author and do not necessarily represent the views of the Institute.



CHARTERED ACCOUNTANT



MANAGEMENT

from being a financial intermediary into a risk intermediary at present. In the process of financial intermediation, the gap of which becomes thinner and thinner, banks are exposed to severe competition and hence are compelled to encounter various types of financial and non-financial risks. Risks and uncertainties form an integral part of banking which by nature entails taking risks. Business grows mainly by taking risk. Greater the risk, higher the profit and hence the business unit must strike a trade off
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