risk_management

May 20th, 2015
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A. T. Still University
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Risk Management in Banks Any activity involves risk, touching all spheres of life, whether it is personal or business, likewise any business situation involves risk. To sustain its operations, a business has to earn profit/revenue and thus has to be involved in activities whose outcomes may be predictable or unpredictable. There may be an adverse outcome, affecting its revenue, profit and capital. However the dictum “no risk, no gain” holds good here. It is also aptly said that “risks do not disappear, they give users a choice: which to retain and which to shed”

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Risk Management in BanksAny activity involves risk, touching all spheres of life, whether it is personal or business, likewise any business situation involves risk. To sustain its operations, a business has to earn profit/revenue and thus has to be involved in activities whose outcomes may be predictable or unpredictable. There may be an adverse outcome, affecting its revenue, profit and capital. However the dictum "no risk, no gain" holds good here. It is also aptly said that "risks do not disappear, they give users a choice: which to retain and which to shed" 4.2 Definition of RiskThe word risk is derived from the Italian word 'risicare' meaning 'to dare'There is no universally acceptable definition for risk. Prof John Geiger has defined it as- "an expression of the danger that the effective future outcome will deviate from the expected or planned outcome in a negative way"The Basel committee has defined risk as- "the probability of the unexpected happening- the probability of suffering a loss"The four letters comprising RISK areR- Rare (unexpected)I- incident (outcome)S -selection (identification)K -knocking (measuring, monitoring, controlling)RISK therefore has to be looked data from four different fundamental aspectsIdentificationMeasurementMonitoringControl( including risk audit)4.3 Risk Vs UncertaintyIn common parlance both risk and uncertainty are used interchangeably. However risk is to be viewed differently from mere uncertainty about

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