financial risk management in banks
Advanced Risk Management – FNC 615
MBA II ‐ Finance
Dr Nawazish Mirza nawazish@nmirza.com Advanced Risk Management – FNC 615 – MBA II ‐ Finance
Advanced Risk Management
Lahore School of Economics
Advanced Risk Management – FNC 615 – MBA II ‐ Finance
‐‐ It is far better to foresee even without certainty than i f b f ih i h not to foresee at all. . . . . .
‐ Henri Poincaré
(1854 – 1912)
‐‐ All of life is the management of the risk and not its
All of life is the management of the risk, and not its elimination. . . . .
Walter Wriston
(1919 – 2005)
Lahore School of Economics
1
Advanced Risk Management – FNC 615
MBA II ‐ Finance
Dr Nawazish Mirza nawazish@nmirza.com Advanced Risk Management – FNC 615 – MBA II ‐ Finance
Risk Management
• Risk and Its Worlds
– Ri k can b d fi d as volatility of unexpected
Risk
be defined l tilit f t d outcomes, which can represent the value of assets, equity or earnings.
– Two Key Terms
• Uncertainty
• Exposure p • Two broad categories of Risk are
– Business risk
– Financial Risk
Lahore School of Economics
Advanced Risk Management – FNC 615 – MBA II ‐ Finance
Risk Management
• Business Risk is the one which the corporations assume willingly to create competitive advantage and add value for shareholders.
– These include the business decisions companies make in business environments in which they operate. Business decisions include
•
•
•
•
Investment decisions
Product development choices
Marketing strategies
Organizational structures
Lahore School of Economics
2
Advanced Risk Management – FNC 615
MBA II ‐ Finance
Dr Nawazish Mirza nawazish@nmirza.com Advanced Risk Management – FNC 615 – MBA II ‐ Finance
Risk Management
• Financial Risk is the one which relate to possible losses owing to financial market activities For activities. instance, gains or losses due to interest rate movements, or defaults on financial
MBA II ‐ Finance
Dr Nawazish Mirza nawazish@nmirza.com Advanced Risk Management – FNC 615 – MBA II ‐ Finance
Advanced Risk Management
Lahore School of Economics
Advanced Risk Management – FNC 615 – MBA II ‐ Finance
‐‐ It is far better to foresee even without certainty than i f b f ih i h not to foresee at all. . . . . .
‐ Henri Poincaré
(1854 – 1912)
‐‐ All of life is the management of the risk and not its
All of life is the management of the risk, and not its elimination. . . . .
Walter Wriston
(1919 – 2005)
Lahore School of Economics
1
Advanced Risk Management – FNC 615
MBA II ‐ Finance
Dr Nawazish Mirza nawazish@nmirza.com Advanced Risk Management – FNC 615 – MBA II ‐ Finance
Risk Management
• Risk and Its Worlds
– Ri k can b d fi d as volatility of unexpected
Risk
be defined l tilit f t d outcomes, which can represent the value of assets, equity or earnings.
– Two Key Terms
• Uncertainty
• Exposure p • Two broad categories of Risk are
– Business risk
– Financial Risk
Lahore School of Economics
Advanced Risk Management – FNC 615 – MBA II ‐ Finance
Risk Management
• Business Risk is the one which the corporations assume willingly to create competitive advantage and add value for shareholders.
– These include the business decisions companies make in business environments in which they operate. Business decisions include
•
•
•
•
Investment decisions
Product development choices
Marketing strategies
Organizational structures
Lahore School of Economics
2
Advanced Risk Management – FNC 615
MBA II ‐ Finance
Dr Nawazish Mirza nawazish@nmirza.com Advanced Risk Management – FNC 615 – MBA II ‐ Finance
Risk Management
• Financial Risk is the one which relate to possible losses owing to financial market activities For activities. instance, gains or losses due to interest rate movements, or defaults on financial