Hazard Management in BankingSlide 2
An Introduction to Risk Management is the way toward measuring or evaluating the real or potential threats of a specific circumstance.Slide 3
Risk Has Two Components Uncertainty. Presentation.Slide 4
Types of Risk Operational. Credit. Reputational.Slide 5
Operational Risk The danger of misfortune coming about because of deficient or fizzled interior procedures, individuals and frameworks, or from outer occasions.Slide 6
Operational Risks Include Internal Fraud. Outer Fraud. Occupation Practices and Workplace Safety. Customers, Products and Business Practices. Harm to Physical Assets. Business Disruption and System Failures. Execution, Delivery and Process Management.Slide 7
Internal Fraud Unauthorized Activity. Exchanges not reported. Exchange sort unapproved. Mismarking of position. Burglary and Fraud. Extortion/credit misrepresentation/useless stores. Burglary/blackmail/misappropriation/theft. Misappropriation of advantages. Imitation. Account assume control/pantomime. Influences/kickbacks. Insider exchanging. Government evasion. Tenacious visual impairment.Slide 8
External Fraud Theft and Fraud. Burglary/theft. Fabrication. Check kiting. Wholesale fraud. Senior money related mishandle. Frameworks Security. Hacking harm. Robbery of data (with money related misfortune).Slide 9
Employment Practices and Workplace Safety Employee Relations. Remuneration, advantage, end issues. Sorted out work issues. Safe Environment. General obligation (slips and falls). Worker wellbeing and security rules. Specialists\' pay. Differing qualities and Discrimination. All separation sorts. Provocation. Rise to Employment Opportunity (EEO).Slide 10
Clients, Products and Business Practices Suitability, Disclosure and Fiduciary. Guardian breaks/rule infringement. Appropriateness/exposure issues. Retail buyer divulgence infringement. Break of protection. Forceful deals. Insufficient item offerings. Account stirring. Abuse of private data. Loan specialist obligation.Slide 11
Clients, Products and Business Practices ( CONTINUED ) Improper Business or Market Practices . Antitrust. Shameful exchange/showcase hone. Showcase control. Insider exchanging (for company). Unlicensed action. Tax evasion.Slide 12
Clients, Products and Business Practices ( CONTINUED ) Selection, Sponsorship and Exposure. Inability to examine customer per rules. Surpassing customer introduction limits. Admonitory Activities. Arguments about execution or counseling exercises.Slide 13
Damage to Physical Assets Disasters and Other Events. Normal catastrophe misfortunes. Human misfortunes from outside sources (fear mongering, vandalism).Slide 14
Business Disruption and System Failures Systems. Equipment. Programming. Broadcast communications. Utility blackout/interruptions.Slide 15
Execution, Delivery and Process Management Transaction Capture, Execution and Maintenance. Miscommunication. Information section, support or stacking mistakes. Missed due date or duty. Demonstrate/framework misoperation. Bookkeeping blunder/substance attribution mistake. Other assignment misperformance. Record maintenance. Documentation upkeep. Conveyance disappointment. Insurance administration disappointment. Reference information support.Slide 16
Execution, Delivery and Process Management (CONTINUED) Monitoring and Reporting. Fizzled required reporting commitments. Mistaken outer (misfortune brought about). Client Intake and Documentation. Unapproved get to given to accounts. Erroneous customer records (misfortune caused). Careless misfortune or harm of customer resources.Slide 17
Execution, Delivery and Process Management (CONTINUED) Customer/Client Account Management. Unapproved get to given to accounts. Mistaken customer records (misfortune acquired). Careless misfortune or harm of customer resources. Exchange Counterparties. Non-customer counterparty misperformance. Merchants and Suppliers. Outsourcing. Seller question.Slide 18
Operational Risk Checklist Employee preparing. Close administration oversight. Isolation of obligations. Representative record verifications. Methods and process. Buy of protection. Leaving certain organizations. Capitalization of dangers.Slide 19
Credit Risk because of a vulnerability in a counterparty\'s capacity to meet its commitments as per settled upon terms.Slide 20
Credit Risks Include: Loans. Acknowledgments. Interbank exchanges. Exchange financing. FX exchanges. Fates. Swaps. Values. Letters of credit. Alternatives.Slide 21
Sound Practices for Managing Credit Risk Establish a fitting credit hazard environment. Work under a sound credit-allowing process. Keep up a suitable credit organization, estimation and observing procedure. Guarantee satisfactory controls over credit hazard.Slide 22
Establish an Appropriate Credit Risk Environment Board of Directors ought to audit credit hazard procedure occasionally. Senior administration ought to execute credit chance system affirmed by the Board.Slide 23
Operate Under a Sound Credit Granting Process Criteria ought to incorporate exhaustive comprehension of the borrower, reason/structure of credit and its wellspring of reimbursement. Build up general credit limits at the level of individual borrowers/associated counterparties. Have an obviously settled process for favoring new credits/expansion of existing credits. Augmentation of credit must be made on an a safe distance premise.Slide 24
Maintain a Credit Administration, Measurement and Monitoring Process Have set up a framework for progressing organization of different hazard bearing portfolios. Build up an inside hazard rating framework for overseeing credit chance. Have a data framework and systematic methods that empower administration to gauge credit danger of on/cockeyed sheet exercises.Slide 25
Maintain a Credit Administration, Measurement and Monitoring Process (CONTINUED) System for checking general sythesis and nature of the credit portfolio. Consider future changes in monetary conditions while evaluating singular credits.Slide 26
Ensure Adequate Controls Over Credit Risk System of autonomous, continuous credit survey. Credit giving capacity is legitimately taken care of and credit exposures are inside points of confinement. Framework for overseeing issue credits.Slide 27
Credit Risk Checklist Stringent credit guidelines for borrowers and counterparties. Strict portfolio chance administration . Steady concentrate on changes in monetary or different conditions that can prompt a decay in the credit remaining of a bank\'s counterparties.Slide 28
Reputational Risk Reputational hazard is the potential that negative attention, whether genuine or not, will bring about loss of clients, disjoining of corporate affiliations, diminish in incomes and increment in expenses.Slide 29
Benefits of Effective Reputation Management Improving relations with shareholders. Making a more positive environment for venture. Enrolling/holding the best representatives. Lessening obstructions to advancement in new markets. Securing premium costs for items. Minimizing dangers of case.Slide 30
The way to overseeing reputational hazard is sound hazard administration , combined with clear correspondence about the issue the bank is confronting.Slide 31
Re-setting up an association\'s notoriety takes quite a while.Slide 32
Reputational Risk Cases Perrier – Toluene follows. Exxon – Valdez spill. Union Carbide – Bhopal, India. Arthur Andersen – Enron destroying. Firestone – Tires.Slide 33
Reputational Risk Checklist Processes for emergency administration are arranged and recorded. Outer impression of the bank are routinely measured. Reputational dangers are efficiently followed. Representatives are prepared to recognize and oversee reputational dangers. Models on natural, human rights and work practices are set publically. Connections and trust with weight bunches and other potential faultfinders are set up.Slide 34
True or False? Corporate notoriety is one of the essential resources of my bank. The dangers including a bank\'s notoriety have expanded fundamentally in the course of recent years. Reputational hazard is harder to oversee than different types of hazard. My bank is proactive in upgrading and securing its notoriety.Slide 35
True or False? It is difficult to evaluate the effect of reputational dangers. My bank more often than not considers its notoriety just when things turn out badly. A well run bank doesn\'t have to put additional assets into guarding against reputational hazard.Slide 36
Risk Management Risk administration is the way toward observing and tending to the potential for misfortune.Slide 37
Evolution of Risk Management Emerged as a teach amid the mid 1990s. Utilized much sooner (1960s). Ordinarily used to portray systems for tending to insurable dangers.Slide 38
"Old" Risk Management Risk decrease through wellbeing, quality control and danger training. Elective hazard financing, including self-protection and hostage protection. The buy of customary protection items. Utilization of subordinates to support or tweak advertise hazard exposures.Slide 39
"New" Risk Management Treats subsidiaries as an issue as much as an answer. Concentrates on reporting, oversight and isolation of obligations inside the association.Slide 40
By the Mid-1990s Regulatory activities. Worries about subsidiaries. Arrival of RiskMetrics. Distributed misfortunes.Slide 41
Enron\'s Experience with Risk Management Maintained a hazard administration work. Lines of reporting were sensibly free. Check to-market valuations were liable to alterations by administration. Few profession hazard administrators. Liquid workforce. Workers continually searching for next exchange.Slide 42
Regulatory Responses from the Financial Services Community Basel II. Sarbanes-Oxley Act of 2002. Graam-Leach-Bliley Act. Bank Secrecy Act/Anti-Money Laundering. Insider Trading Rules. Bank Bribery Act. Reasonable and Accurate Credit Transactions Act (FACTA) Fair Lending F
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