1. Identify the risk warning signs from the perspective of General Risk Management
How can the bank shield itself against cyber-crimes?
What factors should a bank look for before sanctioning a residential mortgage?
Solved by verified expertBanks face a variety of risks, including credit risk, interest rate risk, market risk, operational risk, and reputational risk.
Credit risk is the risk of loss that may occur if a borrower is unable to repay a loan. Interest rate risk is the risk that a change in interest rates will adversely affect the value of a bank’s assets or liabilities. Market risk is the risk that changes in market conditions will adversely affect the value of a bank’s assets or liabilities. Operational risk is the risk of loss that may occur as a result of errors or omissions in
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3. Explain how the following risks are managed by banks:
Credit risk is managed by assessing the creditworthiness of borrowers and setting appropriate loan terms and conditions. Interest rate risk is managed by hedging through the use of interest rate swaps and other financial instruments. Market risk is managed by diversifying the bank’s portfolio of assets and liabilities. Operational risk is managed by implementing strong internal controls and procedures. Reputational risk is managed by maintaining a strong reputation and avoiding involvement in negative publicity.
4. Describe the role of the following in managing risks faced by banks:
The role of the board of directors is to set the tone for the management of risks faced by the bank. The role of senior management is to develop and implement policies and procedures for managing risks. The role of the risk management function is to identify, measure, and monitor risks. The role of the audit function is to provide assurance that risks are being managed effectively.
