Page 40 - Banking Finance August 2024

ARTICLE

RISK IN BANKING:

AN INEVITABLE

THING THAT NEEDS

TO BE MITIGATED

NOT AVOIDED

A s we all know that the banking is a business of not expected or desired. It means that the risk implies future

trust where we are dealing with public money
uncertainty about deviation from expected outcome. Bank
being a financial intermediary is exposed to various risks,
with utmost care and earn the profit which
makes the bank afloat. Risk is involved in every
business decision of banking be it fund based decision, Non- primarily Credit risk, Market risk, Liquidity risk, Operational
risk, Technology risk, compliance risk, Legal risk and
fund-based decision, Financial decision or Non-financial Reputational risk. Every bank is committed to managing all
decision. Risk goes hand in hand which we can not separate the material risks and participating in opportunities as part
from banking. The profit of a bank depends on the risk of the strategic approach of risk calibrated growth in core
management of the bank as the better risk management operating profit with a less scope of provisions.
gives better financial result and on the other hand the bad
risk management puts the bank on risk and some time that Major Risks which the Bank Faces:
may become the reason of having huge loss to the bank.
Risks are part and parcel of the banking business which
The recent crisis of Yes Bank, PMC Bank etc. have shown every bank faces and mitigates them with its laid down
the severity of risk management.
guidelines and policies in the broad framework of Reserve
Bank of India. The major risks which the bank faces are:
If we define Risk in a simple language we can say that the
Risk is the probability of happening some thing bad which is
Operational Risk: The risk which arises due to inadequate
or failed internal processes, people and systems or from any
About the author
external events. Major activities that comes under
Md Nasim Anwer operational risk are Internal fraud, External fraud,
Sr. Manager Faculty Employment practices and workplace safety, Clients,
ZLC Visakhapatnam Products and Processes, Damage to Physical assets of the
bank, Execution and delivery of services etc.

36 | 2024 | AUGUST | BANKING FINANCE