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Corporate Risk Managemenet - Assignment Example
Author : collinshenriett
Finance & Accounting
Pages 9 (2259 words)
Credit Risk Management: Introduction: Risk management refers to the identification, prioritization and assessment of risks, and this is followed by economical and coordinated use of resources meant to control, monitor and minimize the probability of the unfortunate event occurring…
This paper seeks to provide an explanation on how to manage risk in a financial industry. Specifically, this paper provides an explanation on how to manage risks of a banking sector, and this is in regard to the taking of an insurance policy. In the banking sector, Risk management practices focuses on the operational risks, liquidity risks, credit risks, market risk and interest rate risk. This paper focuses mostly on the Credit risk of my hypothetical banking organization. The hypothetical name of my bank is the Bank of Venus. This is a bank, with a presence all over the country, and has more than 300 employees. This bank specializes in offering all manner of banking services, and this includes issuance of loans, safe keeping of precious commodities, money transfer and forex exchange. All these areas have their own risks. Credit risk refers to a situation where a borrower may fail to pay a debt, in which he or she is obligated to pay (Olson and Desheng, 51). The risks involved in this situation include a loss on the interest, and the principal amount given as a loan. Occurrence of this risk also causes a disruption in the cash flow of the bank, and an increase the costs of collecting the debts owed to the bank. Effectively reducing the occurrence of these risks, results to the success of the banking institution. ...