2. Risk is the potential that a chosen
action or activity will lead to an
undesirable outcome.
3. SO SHOULD WE TAKE A RISK???
A Ship is Safe in harbor, however that is not
what ship are for
4. Types of Risks for an organization
Business Risks
Capital Risks
Credit Risks
Market Risks
Liquidity Risk
Environmental Risks
Operational risks
Control Risks
Internal Control Risks
Management Risks (Corporate Governance)
Compliance Risks
Organizational Risks
8. Principles in risk management
Close involvement of top management
Risks varies depending upon the nature of
organization
Probability and Magnitude of identified risks need to
be documented
Proper segregation of duties
Accountability
Internal risk audit
Integration
Risk Tolerance limits
9. In risk management, the organizational setup must
have following elements;
Clarity in the job roles
Inter departmental relationship
Flexibility in terms of inter-connectivity
Control linkages and control rationale
10. Organizational setup of Risk Management
Board of directors
Risk Management Committee
Sub committees
- Credit risk management committee (CRMC)
- Market risk management Committee (MRMC)
- Operational risk management Committee (ORMC)
Each Committee has following cell
- Identification cell
- Measurement Cell
- Monitoring Cell
- Control Cell
11. WHAT IS CREDIT
Credit is the trust which allows one party to
provide resources to another party where that
second party does not reimburse the first
party immediately, but instead arrange either
to repay or return those resources at a later
date
12. What is Credit Risk
The potential that a borrower or counterparty
will fail to meet its obligations in accordance
with agreed term
13. Difference between Credit
Management and Credit risk
Management
Focus (3 Ps in CM and Risks philosophy in CRM)
Approach (Backward in CM and Forward in CRM)
Concern (Repayment in CM and Default in CRM)
Exit Feature (CM does not have Exit plan and CRM
always have Exit plan)
Tools (FS, ratios etc in CM and CVaR, Simulation etc
in CRM)
