Attached.

Kinds of Risk Found in Banks and Other Financial Institutions
Reputational Risk
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Low patronage by the customers and contract Business ventures namely.

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Results from scandals, negative word of mouth or customers service standards.

Market Risk
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Impairment through fluctuation in interest rates, exchange rates and the price of in the
commodities.

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Includes sub-types: It includes interest rate risk, foreign exchange risk equity risk, and
commodity risk.

Systemic Risk
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Wide ranging financial system risk resulting from inter-connected entities.

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Example: specific funds absence in a large institution and its effects on the entire market.

Liquidity Risk
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Probability of mishandling material, loss and consequently inability to fulfill the
obligations when they are due without heavy loss.

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Mention funding risk which is the ability to fund assets and the other is market risk, the
ease of selling an asset.

Credit Risk
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Exposure to borrower’s default or delayed payments on the amounts they borrowed.

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Controlled by evaluating the borrowers’ credit status and risk distribution mechanisms.

Operational Risk
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Cost that arises as a result of inadequate outcomes of, for instance, processes, systems, or
people’s mistakes.

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Consists of credit risks, fraud and scams, other IT risks, system failures; mitigated with
strong internal control mechanisms and staff awareness.

It is the ALM strategies that help an organization to manage the asset and liability overcoming all
the above-mentioned factors.
Capital Adequacy Management
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Safeguarding that the organization has sufficient capital to absorb loss; check under Basel
III norms.

Hedging
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Employing derivative such as swaps or options in order to hedge against fluctuating
interest and exchange rates.

Duration Matching
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To decrease net interest income sensitivity, the maturity of assets and liabilities has been
matched.

Liquidity Management
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Having cash balances, credit line availability, and modeling them for market volatility.

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The diversification of assets and liabilities is a goal of security analysis.

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Investment diversification; the use of many sources of funds...