Comilla University

2. GROUP NO:03
GROUP’S TOPICS NAME: INVESTMENT AND
BANK RISK MANAGEMENT
Course Title: Bank Management
Course Code: 324

3. Mehedi Hasan
Md Amran
Samit Al Hossain
Shahriar Anik
Sayedul Alam Tanvir
Fahima Afroz Prity
Mosaraf Hossain
Md Sahab Uddin
Nargis Akter
Kamrun Naher Rupa
Tahrima Zaman
Mousumi Sarker
Naymul Islam
Mahjabin Haque Nabila
Takvir Al Mahmud
Fahmida Tasnim Tinnee
GROUP MEMBERS:

4. TOPICS NAME:
INVESTMENT AND INVESTMENT MANAGEMENT
Presenter's Name: Fahmida Tasnim Tinnee
Id: 12005045

5. Investment :
“investment in knowledge pays the best interest” - Benjamin Franklin
“Investment is an asset acquired or invested to build wealth and save money from the hard earned
income or appreciation.”
Importance of investment:
 Investing is an effective way to put your money to work and potentially build wealth.
 Smart investing may allow your money to outpace inflation and increase in value.
 Provides tax benefits.

6. Investment Management:
Investment management is the process of making decisions about
investments. It involves researching, selecting, and monitoring a portfolio of
assets that match an investor's goals, risk profile, and timeframes.

7. TOPICS NAME: FEATURES OF INVESTMENT
Presenter's Name: Takvir Al Mahmud
Id: 12005059

8. Features of investment management:
 Nature of Fund: Banks make investment by their residual fund after meeting the reserve and loan
requirements. At first, Banks utilize the funds only for loan purpose without making any
investment. After meeting the loan requirement they use the residual funds in investments.
 Third Line of Defense: Bank loan is also known as the illiquid assets. Primary reserve and
secondary reserve act as the first and second line of defense respectively on the basis of liquidity.
At the time of liquidity crisis, bank’s investment in securities can be used as the third line of
defense.
 Initiative of Transactions: In case of loan, the initiative of transaction comes from borrower. But
in case of investment, the initiative of transaction comes from the part of the bank.
 Volume of Investment Relative to the Size of Bank: According to some empirical studies, small
banks make investments by one-third of funds for the purpose of making profit. But large sized
banks make investment by not more than of 20% of their funds.
 Personal Vs. Impersonal Transaction: In case of banks’ loan activities, there is a direct
transaction between the bankers and the borrowers. But in case of investment, there is no direct
transaction between the main issuers of securities and the banks.

9.  Secondary Reserve Assets vs. Investment Assets: Short-term securities are used as secondary reserve
assets. But in case of investment, medium and long-term financial instruments should be used.
 Negotiation: Borrowers can bargain with the bank about loan amount, installment, security and interest.
But there is no such provision in the case of investment.
 Knowledge of Use of Fund by the provider of Funds: Banks know what the borrower will do with the
loaned amount. But, in the case of investment, banks have no knowledge about what the issuer of
financial security will do with that fund.
 Termination: In case of loan, successful termination depends on the willingness and the ability of the
borrowers rather than the bank. But, in the case of investment it depends on the debt holders.

10. TOPICS NAME:
FUNCTIONS OF INVESTMENT
Presenter's Name: Mahjabin Hoque Nabila
Id: 12005039

11. Investment refers to the purchase of assets that are expected to generate income or appreciate in
value over time. Some of the functions of investment include:
 Maintaining trend of stable income
 Meeting the liquidity gap
 Diversifying the risk of bank funds
 Avoiding centralization of the use of bank funds
 Enhancing income through capital appreciation

12. TOPICS NAME:
FUNCTIONS OF INVESTMENT
Presenter's Name: Naymul Islam
Id: 12005057

13. Functions of investment:
 Capital Accumulation
 Economic growth
 Employment generation
 Innovation and technological advancement
 Economic stability

14. TOPICS NAME:
PRINCIPLES OF SOUND INVESTMENT
Presenter's Name: Mousumi Sarkar
Id: 12005041

15. FACTORS OF PRINCIPLES OF SOUND INVESTMENT
 Qualitative Factors
 Quantitative Factors

16. Quality factors are described below:
1. Purpose of investment : Commercial banks applied different strategies to ameliorate
their income. Investment is one of them. Investment policy should include the
specific Steps and types of investments to achieve specific purposes. In this case, the
investment officer can avoid the wrong decision and take the right decision at the
right time.
2. Safety : Bank's investment officer must consider the effect of price fluctuation of
financial instruments before making investment. If the security price fluctuates, banks
have to face serious problem.
3. Social responsibility : The reputation and success of banking business depends on
the banks' social responsibility. Banks can perform their social responsibility by
purchasing securities issued by government or government approved companies.

17. 4. Convertibility: Investment in securities is easily convertible into cash. Bank
investment officer must invest in those securities which are easily convertible into
cash with little risk of loss of principal value.
5. Business Ethics: Investment is one of the ways of earning income. Bank should not
invest in a business with unethical activity companies.

18. TOPICS NAME: QUANTITATIVE FACTORS
Presenter's Name: Tahrima Zaman
Id: 12005061

19.  1.Profit & Profitability: Like any other business, the main purpose of bank is to maximize thewealth of
the shareholders. If investment income is not satisfactory, it will not be possible to male adequate profit
after meeting cost of fund. Banks should invest in relatively high quality securities after and effective
analysis. proper Bank Management A Fund Emphasis
 2. Business Solvency: Solvency is the ability of a company to meet its long-term debts and financial
obligations. Solvency can be an important measure of financial health, since it's one way of
demonstrating a company’s ability to manage its operations into the foreseeable future.As a profitable
business organization, a bank has to maintain bank solvency So, banks must maintain such liquidity
position which will ensure the ability to satisfy the needs of depositors
 3. Liquidity: Liquidity Management refers to the services your bank provides to its corporate customers
thereby allowing them to optimize interest on their checking/current accounts and pool funds from
different accounts.Liquidity and profitability are the two important considerations of bank. Banks ovest
by keeping the liquidity ar satisfactory level.

20. TOPICS NAME: BANK'S INVESTMENT POLICY
Presenter's Name: Kamrun Naher Rupa
Id: 12005053

21. Bank's investment policy:
A bank's investment policy refers to a formal document that outlines the guidelines, objectives, strategies,
and parameters governing the bank's investment activities. It serves as a blueprint for managing the bank's
investment portfolio and provides a framework for decision-making, risk management, compliance, and
performance and evaluation. . Bank investment policy may be writes or verbal.

22. There are four principal reasons for having a written bank investment policy:
 Clarity and Consistency
 Risk Management.
 Compliance and Governance.
 Long-Term Planning and Performance
So, a written bank investment policy enhances decision-making, risk management, compliance, and
performance evaluation, promoting sound and effective investment practices within the bank.

23. TOPICS NAME: CONSIDERATIONS IN
SELECTING INVESTMENT
PORTFOLIO
Presenter's Name: Nargis Akter
Id: 12005051

24. When selecting an investment portfolio, several key considerations should be taken. Such as:
1. Investment Objectives:
Clearly define your investment objectives. Your objectives will help guide your investment
Decisions.
2. Risk Tolerance:
Assess your risk tolerance level. Determine how much volatility or potential loss you are
comfortable with
3. Time Horizon:
Consider your investment time horizon, which is the length of time you plan to hold your
investments

25. 4. Asset Allocation:
Establish an appropriate asset allocation strategy. Determine the ideal mix of asset classes,
such as stocks, bonds, cash, real estate, or alternative investments, based on your risk
tolerance and investment objectives
5. Diversification:
Diversification helps reduce risk by minimizing exposure to any single investment or market
segment. It can enhance the potential for consistent returns and cushion against adverse
events.

26. TOPICS NAME: CONFEDERATION IN SELECTING
INVESTMENT PORTFOLIO.
Presenter's Name: Md Sahab Uddin
Id:11905039

27.  Investment Research and Due Diligence: Conduct thorough research and due diligence on potential
investments. Evaluate the fundamentals, financial health, management team, competitive positioning, and
growth prospects of individual securities or funds. Consider the risk-return trade-offs and assess whether
they align with your investment goals.
 Cost Efficiency: Consider the costs associated with investing, such as management fees, transaction costs,
and taxes. Minimize expenses to enhance your net returns over time. Low-cost investment options, such as
index funds or ETFs, can be considered to achieve cost efficiency.
 Investment Horizon: Match your investment horizon with the liquidity and maturity characteristics of the
investments. Ensure that your portfolio's investments align with your short-term and long-term liquidity
needs. Investments with longer maturities may offer higher returns but may not be suitable for short-term
cash requirements.

28.  Monitoring and Rebalancing: Regularly monitor your investment portfolio's performance and periodically
rebalance it to maintain the desired asset allocation. Rebalancing involves buying or selling investments to
bring the portfolio back in line with the target allocation. This helps control risk and ensures that your
portfolio remains aligned with your goals.
 Professional Advice: Consider seeking professional advice from financial advisors or investment
professionals. They can provide personalized guidance, help analyze your risk profile, and tailor investment
strategies to your specific needs and circumstances.
Remember that investment decisions should be based on your individual circumstances, financial goals, and risk
tolerance. It's essential to regularly review and adjust your investment portfolio as needed to stay aligned with
your objectives and adapt to changing market conditions.

29. TOPICS NAME:
INVESTMENT STRATEGIES
Presenter's Name: Mosharaf Hossain
Id: 12005047

30. Investment strategies can vary depending on an individual’s financial goals, risk
tolerance, and time horizon. Here are a few common investment strategies:
Diversification
Buy and Hold
Dollar-Cost Averaging
Value Investing
Growth Investing
Income Investing
Index Fund Investing
Tactical Asset Allocation

31. Grading of investable Securities
The grading of investable securities, such as bonds and stocks, is typically
performed by credit rating agencies and financial institutions. These organizations
assess the creditworthiness and investment quality of securities to provide
guidance to investors.
Credit Rating Agencies
Credit rating agencies evaluate the credit risk associated with fixed-income
securities, such as corporate bonds and government bonds. The most well-known
credit rating agencies include Standard & Poor’s (S&P), Moody’s, and Fitch
Ratings. They assign ratings based on an issuer’s ability to meet its financial
obligations. Common ratings include:

32. Common ratings include:
a. Investment Grade: These ratings indicate that the issuer has a low risk of
defaulting on its debt obligations. The most common investment-grade
ratings are ‘AAA’ ‘AA’ ‘A’ ‘BBB ’ (in descending order of quality).
b. Non-Investment Grade (also known as High Yield or Junk Bonds): These
ratings indicate a higher risk of default. Common non-investment grade
ratings are ‘BB’ ‘B’ ‘CCC’ ‘D’ (in descending order of risk).

33. Stock Ratings
Financial institutions, investment banks, and brokerage firms often provide stock
ratings to guide investors. These ratings reflect analysts; opinions on a company’s
expected performance, growth prospects, and valuation. Common stock ratings
include:
a. Buy/Outperform/Overweight: These ratings suggest that the stock is
expected to outperform the market or its peers, and investors should
consider buying or holding the stock.
b. Hold/Neutral: This rating indicates that the stock is expected to perform
in line with the market or its peers. Investors may choose to hold existing
positions but may not actively add to them.
c. Sell/Underperform/Underweight: These ratings imply that the stock is
expected to underperform the market or its peers. Investors may consider
selling or avoiding the stock.

34. TOPICS NAME:
Presenter's Name: Fahima Afroz Prity
Id: 12005055

35. What is risk:
 Risk implies future uncertainty about deviation from expected earnings or expected outcome.
 Risk measures the uncertainty that an investor is willing to take to realize a gain from an
investment.

36. Risk Management:
 Risk management in investment is the process of identifying, analyzing, and mitigating
these risks to
protect and optimize the value of investments.
 Some common types of risks in investment include
1. Market risk (fluctuations in interest rate, inflation)
2. Credit risk (default of a borrower or a counterparty in a derivative contract)
3. Liquidity risk

37. 4.Operational risk (fraud, errors or disruptions in technology or operation)
5. Systemic risk (recession or a financial crisis)
 Investors can manage these risks by:
• diversifying their portfolio across different asset classes and geographies,
• setting appropriate risk limits and investment goals,
• by monitoring the performance and creditworthiness of their investments,
and staying informed
about market developments and trends

38. TOPICS NAME: IMPORTANCE AND SCOPE OF
BANK RISK MANAGEMENT
Presenter's Name: Sayedul Alam Tanvir
Id: 12005049

39. Importance of Bank Risk Management:
Bank risk management is important for several reasons:
 Financial Stability: Effective risk management practices help ensure the stability and soundness
of banks.
 Protection of Shareholder’s Value: Risk management plays a crucial role in protecting
shareholders' value. By proactively managing risks, banks can reduce the likelihood of financial
losses and preserve capital.
 Customer Trust and Reputation: Banks rely on customer trust and confidence to attract deposits,
secure investments, and maintain long-term relationships. Effective risk management helps to
prevent adverse events that can erode trust, such as fraud, operational failures, or credit losses.
When customers.
 Operational Efficiency: Risk management practices help banks identify and address vulnerabilities
in their operations, processes, and systems.
 Compliance with Stakeholder Expectations

40. Scope of bank risk management:
 The scope of bank risk management encompasses the identification, assessment, and management of
risks faced by financial institutions. Banks are exposed to various types of risks, including credit risk,
market risk, liquidity risk, operational risk, and reputational risk, among others.
 Bank risk management aims to mitigate the impact of these risks on a bank's financial performance,
reputation, and ability to meet its obligations.

41. The scope of bank risk management includes the following:
 Risk identification: Banks must identify the risks that they face, both internal and external. This involves
understanding the nature of the risks and their potential impact on the bank's operations and financial
health.
 Risk assessment: Once risks have been identified, banks must assess their likelihood and potential
impact. This helps to prioritize risks and determine the appropriate level of resources to allocate to
managing them.
 Risk mitigation: Banks must implement strategies to mitigate the risks that they face. This may involve
implementing controls, developing contingency plans, or transferring risk through insurance or other
means.
 Risk monitoring: Banks must continuously monitor their risks to detect changes in risk levels and to
ensure that risk mitigation strategies are effective. This involves setting up risk management frameworks
and risk reporting systems.

42. TOPICS NAME:
SCOPE
Presenter's Name: Shahriar Anik
Id: 12005043

43. Scope of bank risk management:
 Risk reporting: Banks must report their risk levels and mitigation strategies to internal
stakeholders such as the board of directors and senior management, as well as external stakeholders
such as regulators and investors.
 Compliance with regulatory requirements: Banks must comply with various regulatory
requirements related to risk management, such as the Basel Accords.
 Stress testing and scenario analysis: Banks must conduct stress testing and scenario analysis to
assess their resilience to adverse events and identify potential areas of weakness.

44.  Risk culture and governance: Banks must establish a strong risk culture and effective governance
structures to support their risk management framework. This involves ensuring that risk
management is embedded in the bank's culture and that appropriate checks and balances are in
place to ensure effective risk management.
In conclusion, the risk management should be an integral part of the bank management, promoting
operational efficiency rather than bureaucracy, by permanently analysis the cost/benefit generated by
the reaction to risk.

45. TOPICS NAME:
NATURE OF RISK AND RISK
MANAGEMENT
Presenter's Name: Samit Al Hossain
Id: 12005035

46. The nature of risk refers to the inherent uncertainty and potential for adverse events or outcomes that exist in
various activities, decisions, or situations. Risk is an integral part of life and can be found in personal,
organizational, financial, and environmental contexts. It arises due to factors such as uncertainty, volatility,
complexity, and variability.
Risk management is the process of identifying, assessing, prioritizing, and mitigating risks to minimize their
negative impact and maximize opportunities. It involves a systematic approach to understanding and addressing
risks in order to protect assets, achieve objectives, and enhance overall decision-making. The key components of
risk management typically include:
• Risk Identification: Recognizing and understanding potential risks that may affect an organization or a specific
activity. This involves examining internal and external factors, reviewing past experiences, and using techniques
such as brainstorming, checklists, and scenario analysis.
• Risk Assessment: Evaluating the identified risks in terms of their likelihood and potential impact. This step
helps prioritize risks and determine their significance, allowing for a more effective allocation of resources and
planning appropriate risk responses.
• Risk Mitigation: Developing and implementing strategies to reduce or eliminate risks. This can involve risk
avoidance (eliminating the source of risk), risk reduction (implementing controls and safeguards), risk transfer
(shifting risk to another party through contracts or insurance), or risk acceptance (accepting the consequences of
the risk).

47. • Risk Monitoring: Continuously monitoring and reviewing risks to ensure that the implemented risk
management strategies are effective and relevant. This may involve regular assessments, performance
indicators, audits, and feedback mechanisms to identify changes in the risk landscape and adjust risk
management activities accordingly.
• Risk Communication: Effectively communicating risks and risk management practices to stakeholders,
including employees, management, investors, regulators, and the public. Transparent and clear
communication helps build trust, ensures awareness and understanding, and facilitates informed decision-
making.
• Risk Governance: Establishing a framework for accountability, responsibility, and oversight of risk
management activities. This includes defining roles and responsibilities, setting risk appetite and
tolerance levels, and integrating risk management into the organization's overall governance structure.

48. EXAMPLE:
Nature of Risk:
Let's say you are a business owner who manufactures and sells electronic products. One nature of the risk
you might face is the risk of supply chain disruption. This could occur due to various factors such as
natural disasters, political instability, or economic crises. If your key suppliers are unable to deliver the
necessary components or materials, it can result in production delays, inventory shortages, and potential
revenue loss.

49. TOPICS NAME: CLASSIFICATION OF BANK RISK
Presenter's Name: Md Amran
Id: 12005037

50. • Credit risk
• Market risk
• Liquidity risk
• Operational risk
• Legal and regulatory risk
• Reputation risk
• System risk

51. • Credit Risk: The risk of loss due to the failure of a borrower or counterparty to fulfill their contractual
obligations.
• Market Risk: The risk of loss due to adverse changes in market conditions, such as interest rates, exchange rates,
commodity prices, and equity prices.
• Liquidity Risk: The risk of loss due to the inability to meet financial obligations as they become due, or the
inability to fund future business operations.
• Operational Risk: The risk of loss due to inadequate or failed internal processes, people, systems, or external
events.
• Legal and Regulatory Risk: The risk of loss due to violations of laws, regulations, or industry standards.
• Reputational Risk: The risk of loss due to damage to the bank's reputation or brand, caused by negative
publicity, customer complaints, or other factors.
• Systemic Risk: The risk of loss due to disruptions in the financial system as a whole, rather than just within a
single institution.

52. TOPICS NAME: GUIDELINES IN
MANAGING CORE RISK IN BANKING
Presenter's Name: Mehedi Hasan
Id: 12005033

53. MANAGING CORE RISKS IN BANKING IS CRUCIAL FOR ENSURING THE STABILITY AND
SUSTAINABILITY OF FINANCIAL INSTITUTIONS. HERE ARE SOME GUIDELINES TO HELP
EFFECTIVELY MANAGE CORE RISKS IN BANKING:
RISK MANAGEMENT FRAMEWORK: ESTABLISH A ROBUST RISK MANAGEMENT FRAMEWORK
THAT ENCOMPASSES THE ENTIRE ORGANIZATION. THIS FRAMEWORK SHOULD INCLUDE
CLEAR RISK APPETITE STATEMENTS, RISK IDENTIFICATION PROCESSES, RISK MEASUREMENT
METHODOLOGIES, RISK MITIGATION STRATEGIES, AND ONGOING MONITORING AND
REPORTING MECHANISMS.
GOVERNANCE AND BOARD OVERSIGHT: ENSURE THAT THE BOARD OF DIRECTORS
PROVIDES STRONG OVERSIGHT OF RISK MANAGEMENT ACTIVITIES. THE BOARD SHOULD SET
THE RISK APPETITE AND ENSURE THAT APPROPRIATE RISK MANAGEMENT POLICIES AND
PROCEDURES ARE IN PLACE. REGULAR REPORTING ON RISK EXPOSURES AND MITIGATION
EFFORTS SHOULD BE PROVIDED TO THE BOARD.
RISK IDENTIFICATION AND ASSESSMENT: CONDUCT COMPREHENSIVE RISK IDENTIFICATION
AND ASSESSMENT PROCESSES TO IDENTIFYALL POTENTIAL RISKS FACED BY THE BANK. THIS
SHOULD INCLUDE BOTH INTERNAL RISKS (SUCH AS CREDIT RISK, MARKET RISK, LIQUIDITY
RISK, AND OPERATIONAL RISK) AND EXTERNAL RISKS (SUCH AS ECONOMIC CONDITIONS,
REGULATORY CHANGES, AND GEOPOLITICAL RISKS). USE QUANTITATIVE AND QUALITATIVE
METHODS TO ASSESS EACH RISK'S POTENTIAL IMPACT AND LIKELIHOOD.

54. RISK MITIGATION STRATEGIES: DEVELOP AND IMPLEMENT EFFECTIVE RISK MITIGATION
STRATEGIES FOR EACH IDENTIFIED RISK. THIS MAY INVOLVE SETTING RISK LIMITS,
DIVERSIFYING PORTFOLIOS, HEDGING, IMPLEMENTING INTERNAL CONTROLS, AND
ESTABLISHING CONTINGENCY PLANS. DEVELOP COMPREHENSIVE POLICIES AND
PROCEDURES TO GUIDE RISK MITIGATION EFFORTS.
STRESS TESTING: REGULARLY PERFORM STRESS TESTS TO EVALUATE THE RESILIENCE OF
THE BANK'S BALANCE SHEET AND OVERALL FINANCIAL POSITION UNDER VARIOUS
ADVERSE SCENARIOS. STRESS TESTING HELPS IDENTIFY POTENTIAL VULNERABILITIES
AND ENABLES THE BANK TO TAKE PROACTIVE MEASURES TO STRENGTHEN ITS RISK
MANAGEMENT PRACTICES.
RISK MONITORING AND REPORTING: ESTABLISH A ROBUST RISK MONITORING AND
REPORTING SYSTEM TO TRACK RISK EXPOSURES ON AN ONGOING BASIS. IMPLEMENT KEY
RISK INDICATORS (KRIS) AND EARLY WARNING INDICATORS (EWIS) TO DETECT POTENTIAL
RISK BREACHES. REGULARLY REPORT RISK EXPOSURES, MITIGATION EFFORTS, AND RISK
MANAGEMENT PERFORMANCE TO SENIOR MANAGEMENT, THE BOARD, AND RELEVANT
STAKEHOLDERS.

55. COMPLIANCE AND REGULATORY FRAMEWORK: ENSURE COMPLIANCE WITH
APPLICABLE LAWS, REGULATIONS, AND INDUSTRY STANDARDS. STAY UPDATED ON
REGULATORY CHANGES AND ADJUST RISK MANAGEMENT PRACTICES ACCORDINGLY.
ESTABLISH A STRONG COMPLIANCE FUNCTION TO MONITOR ADHERENCE TO REGULATORY
REQUIREMENTS AND INTERNAL POLICIES.
EMPLOYEE TRAINING AND AWARENESS: PROVIDE COMPREHENSIVE TRAINING
PROGRAMS TO EMPLOYEES AT ALL LEVELS TO ENHANCE THEIR UNDERSTANDING OF
RISKS AND RISK MANAGEMENT TECHNIQUES. FOSTER A RISK-AWARE CULTURE WITHIN
THE ORGANIZATION, WHERE ALL EMPLOYEES RECOGNIZE THEIR ROLE IN MANAGING
RISKS EFFECTIVELY.
BUSINESS CONTINUITY PLANNING: DEVELOP AND MAINTAIN A ROBUST BUSINESS
CONTINUITY PLAN TO ENSURE THE BANK CAN CONTINUE OPERATIONS IN THE EVENT OF A
DISRUPTION OR CRISIS. THIS PLAN SHOULD ADDRESS VARIOUS SCENARIOS, INCLUDING
TECHNOLOGY FAILURES, NATURAL DISASTERS, CYBER-ATTACKS, AND OTHER
EMERGENCIES.