INTRODUCTION

Risk is the potential that a chosen action or activity will lead to an undesirable outcome.

SO SHOULD WE TAKE A RISK???

A Ship is Safe in harbor, however that is not what ship are for

Types of Risks for an organizationBusiness Risks

Capital RisksCredit RisksMarket RisksLiquidity RiskEnvironmental Risks Operational risks

Control RisksInternal Control RisksManagement Risks (Corporate Governance)Compliance RisksOrganizational Risks

RISKS & TIME LINE

RISK MATRIX

Basic steps of risk management

Principles in risk managementClose involvement of top managementRisks varies depending upon the nature of

organizationProbability and Magnitude of identified risks

need to be documentedProper segregation of dutiesAccountability Internal risk auditIntegrationRisk Tolerance limits

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

Organizational setup of Risk ManagementBoard 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

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

What is Credit Risk

The potential that a borrower or counterparty will fail to meet its

obligations in accordance with agreed term

Difference between Credit Management and Credit risk ManagementFocus (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)