Thursday, 17 October 2019

The Risk , Banking Fundamentals to Know for Students.

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RISK
Banks Perspective:
Banks are exposed to the following six types of financial risks:  a. Interest risk b. Liquidity risk c. Credit risk d. Currency risk e. Capital risk f. Contingent risk
*Interest rate risk is a type of Market risk.
*The risk that arises due to worsening of credit quality is Credit Spread Risk.
*The uncertainty of interest rate movements gave rise to interest rate risk, thereby causing Banks to look for processes to manage their risk.
*In the wake of Interest rate risk came liquidity risk and credit risk as inherent components of risk of Banks.
*Net Interest Income is the difference between interest earned and interest paid.

General Perspective
What are the 3 types of risk?

Three types of risks :
a) Personal risk describes the loss of life or loss of income because of a sickness,
 b) disability 
c) old age, or unemployment.
The Main Types of Business Risk
·         Strategic Risk.
·         Compliance Risk.
·         Operational Risk.
·         Financial Risk.
·         Reputational Risk.
Types of investment risk
·         Market risk. The risk of investments declining in value because of economic developments or other events that affect the entire market.
·         Liquidity risk.
·         Concentration risk.
·         Credit risk.
·         Reinvestment risk.
·         Inflation risk.
·         Horizon risk.
·         Longevity risk.
Four main types of operational risk

A popular way is to use one of four main categories, namely
a) operational risk,
b) financial risk,
c) environmental risk 
 d) reputational risk.
What is the risk management process?
In business, risk management is defined as the process of identifying, monitoring and managing potential risks in order to minimize the negative impact they may have on an organization. Examples of potential risks include security breaches, data loss, cyber-attacks, system failures, and natural disasters.
What are the five steps in the risk management process?
Together these 5 risk management process steps combine to deliver a simple and effective risk management process.
·         Step 1: Identify the Risk.
·         Step 2: Analyze the risk.
·         Step 3: Evaluate or Rank the Risk.
·         Step 4: Treat the Risk.
·         Step 5: Monitor and Review the risk.





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