...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...
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...Risk management in banking sector Table of content Particulars | Page no. | Executive summary | | Introduction | | Literature review | | Research methodology | | Sampling techniques | | Tools of analysis | | Data analysis & findings | | Conclusions | | Scope for further research | | Reference | | Executive Summary Today, The Indian Economy is in the process of becoming a world class economy. The Indian banking industry is making great advancement in terms of quality, quantity, expansion and diversification and is keeping up with the updated technology, ability, stability and thrust of a financial system, where the commercial banks play a very important role, emphasize the very special need of a strong and effective control system with extra concern for the risk involved in the business. Globalization, Liberalization and Privatization have opened up a new methods of Financial transaction where risk level is very high. In banks and financial institutions risk is considered to be the most important factor of earnings. Therefore they have to balance the Relationship between risk and return. In reality we can say that management of financial institution is nothing but a management of risk managing financial risk systematically and professionally becomes an even more important task. Rising global competition, increasing deregulation, introduction of innovative products and delivery channels have pushed risk management to the forefront...
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...RISK MANAGEMENT THE NIGERIAN BANKING SECTOR FOR ABI ALCHEMY BUSINESS INTELLIGENCE BY OYINDAMOLA OMOSEBI CONSULTANT ALCHEMY BUSINESS INTELLIGENCE 5TH MAY 2012 Table of Content 1.0 Overview of Risk Management 1.1 Principle of Risk Management 1.2 The Risk Management Process 1.2.1 Risk Identification 1.2.2 Risk Assessment/Measurement 1.2.3 Risk Mitigation 1.3 Risk Management Plan 1.3.1 Implementation 1.3.2 Review and Evaluation of Plan 2.0 A Review of Risks in Banking 2.1 Overview of Risk Management Practices in Nigerian Banks 2.1.1 Reputational Risk and Confidence Crisis in the Nigerian Banking Industry 2.1.2 Operational Risk 2.1.3 Credit Risk 2.1.4 Human Resources Risk 2.1.5 Risk Associated with Mergers and Acquisition 2.2 Current Regulatory and the Way Forward 3.0 Summary and Conclusion 1.0 Overview of Risk Management There is risk in every business because of uncertainty about future events and exposure, almost everything we do in the business world involves risk. This is the probability that organization or an individual will be unable to meet some expectations set for itself during a given period or could incur a financial loss because of some known or unknown threats or events outside his immediate control. Therefore, Risk Management is the identification, assessment, and prioritization of these risks followed by coordinated and effective application of resources to minimize, monitor, and control the probability and/or impact...
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...RISK MANAGEMENT IN ISLAMIC BANKING AND FINANCE: THE ARAB FINANCE HOUSE EXAMPLE Bilal A. Fleifel A Thesis Submitted to the University of North Carolina Wilmington in Partial Fulfillment of the Requirements for the Degree of Master of Business Administration Cameron School of Business University of North Carolina Wilmington 2009 Approved By Advisory Committee Howard Rasheed Cetin Ciner William H. Sackley Chair Accepted By DN: cn=Robert D. Roer, o=UNCW, ou=Dean of the Graduate School & Research, email=roer@uncw. edu, c=US Date: 2010.01.21 15:02:51 -05'00' ________________________ Dean, Graduate School TABLE OF CONTENTS TABLE OF CONTENTS ..................................................................................................... ii ABSTRACT........................................................................................................................ vi ACKNOWLEDGMENTS .................................................................................................. vii DEDICATION .................................................................................................................. viii LIST OF TABLES .............................................................................................................. ix LIST OF FIGURES...............................................................................................................x GLOSSARY .............................
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...developed, Britain, as the nation with the largest and strongest navy, could spread its commercial interests far and wide. It therefore became the most active trading nation, with a vast empire of colonies. As a result, Britain’s currency, the pound sterling, became a benchmark to which other currencies were compared (and exchanged) for most of the seventeenth, eighteenth and nineteenth centuries. Today, most currencies are compared to the U.S. Dollar, currently the most active and commercially strong trading nation; many currencies are still “pegged” to the U.S. Dollar for their exchange rate. Because FX risks can be identified, they can be managed. Foreign exchange management requires that governments, companies, and individuals understand the factors that influence the valuation of currency. By identifying these factors, they can enter into transactions that mitigate the risks to acceptable levels. These transactions, or hedge positions, are designed to maximize the economic benefit of foreign exchange receipts, and payments for governments, multinational companies, or individuals 1.1. Foreign Exchange Foreign Exchange (FX) is the conversion of currency of one country to the currency of other country whereas foreign currency is any currency other than the country’s own currency. 1.2. Foreign Exchange Market Foreign Exchange Market is a market where the...
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...LONDON SCHOOL OF BUSINESS AND FINANCE CREDIT RISK MANAGEMENT OF NON-BANKING FINANCIAL INSTITTUTION IN GHANA (A CASE STUDY OF TF FINANCIAL SERVICES) BY STEPHEN KWADWO NTIRI A Thesis Submitted to the London School of Business and Finance in Partial Fulfilment of the Requirement for the MBA Degree in Financial Services MARCH 2010 DECLARATION I Stephen Kwadwo Ntiri hereby declare that except for references to other people’s work, which have duly been acknowledged, the work presented here was carried out by me, MBA student of Financial Servies at the London School of Business and Finance (LSBF), under the supervision of Randolph Metz-Johnson. I also declare that this work has never been submitted partially or wholly to any other institution for the award of a certificate. …………………………………………… ……………... Stephen Kwadwo Ntiri Date (Student) ………………………………………… …………… Randolph Metz-Johnson Date (Supervisor) Dedication This research project is dedicated to Almighty God for His abundant blessings and protection given me throughout this study, and also to my family for the support I received from them. Acknowledgement I am most grateful to Almighty God who through His infinite mercy and love guided me throughout the duration of the programme. I wish to acknowledge the help and encouragement I got from the entire staff of TF Financial Services, especially Mr. Benjamin Turkson, which has enabled me to complete this work. I also want to thank my wife, Esther Yamoaba...
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...Request For Permission To Pursue Research |Paychex, Inc | |Memo To: Frank Fiorille, Director CC: Michael Silsbee, Risk Management Supervisor: Doug Baxter, Credit and Banking Risk Manager From: Danielle Cole Date: 3/16/2010 Re: Request for research proposal Request for Approval I’d like your approval for me to continue with my research on the benefits of switching to a lockbox for our invoice payments. In this memo, you will find some of the highlighted benefits that I feel will help you make your decision for me to continue with this research. A lockbox is a P.O. Box that is set up with our bank that our customers will be able to send their payments too. The bank has a machine that will open, sort and process the checks. Once the day’s checks are processed, the bank will create a file and send it to us. The Information Technology will load the file into our Oracle system and once the nightly processes run, the file will post automatically into our billing system. In my initial research of the benefits of switching to a lockbox, I have found many advantages. Switching to a lockbox could mean a reduction in costs, less errors, it would be more time efficient, and we would have an easier look up process. Switching to a lockbox could save us money by possibly reducing our head count. We have the potential to reduce our head count by two people. We could also save money because we could cut out fuel reimbursement casts. If we had a lockbox, the people...
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...13 ------------------------------------------------- Batch: PGDM 2011 - 13 Term: IV ------------------------------------------------- ------------------------------------------------- Course: Commercial Bank Management (CBM) Credits: 3 ------------------------------------------------- ------------------------------------------------- Course Instructor: Prof. D N Panigrahi Objectives of the course: The course inputs are designed to accomplish the following objectives. * To help students to understand the role and functions of Commercial Banks, main strategic issues in retail and corporate banking and the risks faced by the Banking Industry in India. * To familiarise the students with the new Banking Practices and Processes including new banking technologies. * To familiarise the students with the legal and regulatory framework for banks in India. * To equip the students with the tools and techniques used in interpreting and evaluating the performance, profitability, productivity, and efficiency of the Commercial Banks. * To equip the students with the in-depth knowledge of Bank Financial Management Process including Treasury, Investment, Asset Liability Management & Risk Management. * To equip the students with the in-depth knowledge and skills in Credit Analysis & Appraisal Processes relating to the banks’ lending decisions like Working Capital Financing, Term Loan & Project Financing, Domestic & International...
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...Risk Management in Islamic and Conventional Banks: A Differential Analysis Salman Ahmed Shaikh* Dr. Amanat Ali Jalbani Abstract Islamic banking is interest-free banking which makes it necessary for Islamic banks to take active part in the operations of the business, i.e. share profits as well as losses. Banks including Islamic banks prefer to take minimum risk. On the surface, it may seem that Islamic banks face more risk and hence, will have more volatile or even negative returns on their assets. This paper analyzes the risk management procedures of Islamic banks by giving a differential analysis of risk management discussing only the unique characteristics of risk management in Islamic Banking. The usual credit assessment procedures and BASEL are not discussed. This paper looks at the comparative performance of Islamic banks and conventional banks by using ROE as the benchmark. Keywords: Risk management, commercial banking, Islamic banking, price risk 1. Introduction 1.1. Background of the Study Islamic Banking was first introduced in 1959 in Egypt. Since then, Islamic Banking is growing rapidly throughout the world and has been introduced in more than 60 countries of the world so far. Global financial players like Citibank, ABN AMRO, American Express Bank, HSBC, etc. are also participating in Islamic Banking and Financial Industry. However, skepticism still surrounds Islamic Banking keeping into view the earlier demise of BCCI. Profit and loss sharing...
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...Major Problems of the Banking Industry and Strategies to overcome them: A study on Bangladesh. Table of Content Topic Page# 1.0 Introduction ------------------------------------------------------------------------------------3 2.0 Review of Previous Empirical Literature------------------------------------------------4 3.0 Banking Industry in Bangladesh---------------------------------------------------------- 3.1 What is a Bank? ----------------------------------------------------------------------5 3.2 Definitions of Bank form different view -------------------------------------5 3.3 Where does the word BANK come from? ------------------------------------6 3.4 Why Banks? Why don’t go to another financial institution? -------------7 3.5 Banking System in Bangladesh---------------------------------------------------7 3.6 Banking system is very from country to country because of Following 3 reasons---------------------------------------------------------------------12 3.7 There are different kinds of financial services firms calling themselves Banks---------------------------------------------------------------------------------------12 4.0 Major Problems Faced by Bangladeshi Banking Industry-------------------------14 4.1 Lack of Good Governance, Accountability and Transparency------------14 4.2 Low quality of asset ---------...
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...There has been no shortage of news regarding banking scandals and crises over the past three decades both globally and in the United States. This increased awareness has led to the focus upon legislation to stem this trend in addition to creating guidelines for how financial reporting should regulated in order to stabilize the banking industry. Part of this effort has been led by the Basel Committee in its creation of its Core Principles for Effective Banking Supervision consultative document that was released in December 2011. The committee consisting bankers and regulators from its 27 member countries provides a framework for establishing bank governance. The United States, even though a member of the Basel Committee, had previously resisted implementing this framework, instead favoring its own legislation. However, the Federal Reserve agreed to adopt the Basel rules as means of governing the nation's banks against the objections of large financial institutions who argued that these guidelines are too strict. As of May 2012, the proposal of this agreement has not yet been released by the Federal Reserve. It is hoped that the endorsement from the United States of the new requirements under Basel III will work to encourage the European Union to follow suit. Banking Supervision Unlike many of the other countries that follow the Basel framework and have only one bank regulator, the United States banking system is governed by the Federal Reserve. The Federal Reserve consists of...
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...Risk Management in the Asian Banking Sector “What is the best strategy for the implementation of Enterprise Risk Management in the banking sector of the highly expansive but volatile Asian economy?” I chose to do an in-depth study of this area of risk management because as I am Australian, it is extremely important for me to start to fully understand the workings of our closest economic partner and the future of our economy which is driven by the expansive growth that is rolling through Asia. I was also intrigued into the steps needed to fully adopt a risk management system in an entity. It should be noted that the focus of this paper is on the developing region of South-East Asia and less on the more developed parts of Asia including China and Korea. Matthew Dichiera 11167674 Contents 1 – Introduction 2 – 1997 Asian Financial Crisis and effect on vision of risk management 3 – Overview of risks faced by banks in the developing Asian region 4 – Importance of Enterprise risk management (ERM) 5 – Strategies of implementing ERM and the challenges associated. 6 – Conclusion 7 – References Introduction The Asian economy is a vehicle of highly expansive growth and even higher volatility, it is an area of the economic world which must be treated with much anticipation and be viewed with excitement but also must be monitored and watched extremely carefully as was shown by the infamous Asian financial crisis of 1997. Opportunities for growth are high, which...
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...RISK AND RISK MANAGEMENT OF RURAL AND AGRICULTURAL FINANCE (MD. IBRAHIM KHOLILULLAH, DEPT OF AG.FINANCE, BAU MOB: 01718996557) INTRODUCTION When discussing rural finance in Bangladesh, the foremost issue that merits mention is that loans to agriculture are generally offered only by specialized agricultural banks, since commercial banks and microfinance institutions largely refrain from financing the sector. There are many reasons for this, the most important of which is that this finance is strewn with risks, some of which the state is most likely to address. Hence, the governments hold ownership of these banks and their capital, and finance and support them. Agricultural banks are exposed to the above two risks. These dual risks continually expose them to losses and bank ruptcy unless they have excellent risk management practices and/or are financially supported by the government. Some of the risks that the banks encounter are, inter alia: operational risks, market risks, credit risks, and inadequacy of capital. These interrelated banking risks are faced by all commercial banks, agricultural banks and governmental banks. They may be created as a result of inadequate fund allocation, weak labour regulations, mismanagement, an unsuitable operating environment, weak training programmes, bad credit transactions and price fluctuations. Two problems must be mentioned in this regard: difficulty in measuring banking risks, and the lack of specialized management of most agricultural...
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...While green banking is not yet a key reason for most customers to select one financial institution over another, customer demands and greater environmental awareness are driving a number of financial institutions to go green. Environment is a key focus amongst ethical banks (in this field specially called sustainability or green banks) as well as amongst many conventional banks that wish to appear more ethically oriented or that see switching to more environmental practices to be to their advantage. In general bankers “consider themselves to be in a relatively environmentally friendly industry (in terms of emissions and pollution). However, given their potential exposure to risk, they have been surprisingly slow to examine the environmental performance of their clients. A stated reason for this is that such an examination would ‘require interference’ with a client’s activities. While the desire to not meddle in the business of the client is valid, one could also note that banks are required to interfere in the business of their clients regularly to ensure that the clients’ business plan is viable before issuing them a loan. The kind of analysis that all banks partake in is termed a single bottom line analysis (this analysis only considers financial performance). It is arguable whether or not performing a triple bottom line analysis (an analysis that takes into account environmental, social, and financial performance) would be any more intrusive in case of banking sector. As...
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...Chinese Banking System- Risk Management Central banks are the principal monetary authority of a country or a group of countries and are crucial to the functioning of all banks, financial markets, and the economy. “Central banks typically expose themselves to variety of risks including market, credit, interest rate and liquidity risk”. (PWC.com). Furthermore, central banks are exposed to significant reputational and operational risks as well as legal risks. Central banks necessitate the combination ofliquidity, safety and the enhancement of returns on invested funds, as the fundamental criteria for managing its reserves and financial risks. Hence, central banks usually implement a separate risk management department that monitors the central bank widerisks. In the Chinese banking system, China Bank Regulatory Commission (CBRC) is responsible for overseeing risk management of all the Chinese banks. The CBRC requires banks to take operative measures to address the weaknesses in their internal controls and improve their risk management and internal control practices.Due to the complicated and changing economic and market environments, both internationally and domestically, along with the emerging risks on various fronts, the CBRC strives to take responsive actions to facilitate sound and sustainable economic and financial developments in China. It endeavors to identify andmitigate risks in a forward-looking manner, by constantly improving the regulatory framework and supervisory...
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