Thesis: Risk Management of Selected Banks
CHAPTER 1
THE PROBLEM AND ITS BACKGROUND
Background of the study
Banking plays an important role in the lives of individuals as well as nations. As a matter of fact, you couldn’t just imagine how our economic system in particular could function efficiently and effectively without the services rendered by banks. As the center of the financial sector, the banking industry in most emerging economies is passing through a process of change. With the passing of years, our banking system underwent rapid development which includes how they handle different risks to survive in their industry. As the financial activity has become a major economic activity in most economies, any interference or imbalance in banking system’s infrastructure will have significant impact on the entire economy. So to avoid any disruption on this, different banks used their own risk handling methods otherwise called a risk management as their key solution on this.
Risk is a situation involving exposure to danger. It is the possibility that something unpleasant will happen. It may be also an object (person or thing) that creates or intensifies a risk situation. It may be also a scenario that can be described (qualified, if not quantified) and that may be damaging, in any way, to an organization or institution. It may cause a “loss” directly or indirectly.
Any manage and control of potential risks is called risk management. It has a big part in any organization or an institution to have awareness. In the field of banking, it is an industry called as risky business and there is always a management as front-runners when it comes to risks. Risk management approve and monitor risk limits, limit exceptions, new forms of transactions and function as eyes and ears of senior management with regard to risk taking of business.
Due to these various uncertainties and risks, bank managers need reliable risk measures to direct capital to stay within limits imposed by readily available
THE PROBLEM AND ITS BACKGROUND
Background of the study
Banking plays an important role in the lives of individuals as well as nations. As a matter of fact, you couldn’t just imagine how our economic system in particular could function efficiently and effectively without the services rendered by banks. As the center of the financial sector, the banking industry in most emerging economies is passing through a process of change. With the passing of years, our banking system underwent rapid development which includes how they handle different risks to survive in their industry. As the financial activity has become a major economic activity in most economies, any interference or imbalance in banking system’s infrastructure will have significant impact on the entire economy. So to avoid any disruption on this, different banks used their own risk handling methods otherwise called a risk management as their key solution on this.
Risk is a situation involving exposure to danger. It is the possibility that something unpleasant will happen. It may be also an object (person or thing) that creates or intensifies a risk situation. It may be also a scenario that can be described (qualified, if not quantified) and that may be damaging, in any way, to an organization or institution. It may cause a “loss” directly or indirectly.
Any manage and control of potential risks is called risk management. It has a big part in any organization or an institution to have awareness. In the field of banking, it is an industry called as risky business and there is always a management as front-runners when it comes to risks. Risk management approve and monitor risk limits, limit exceptions, new forms of transactions and function as eyes and ears of senior management with regard to risk taking of business.
Due to these various uncertainties and risks, bank managers need reliable risk measures to direct capital to stay within limits imposed by readily available