Financial risk in an organization is chance that the result
of an act or event could bring up unfavorable impacts. Such outcomes could
either result in a direct loss or may result in annoyance of limitations on
organization’s capability to assemble its business objectives.
Risk Management is a regulation at the hub of every
financial institution and covers all the actions that have an effect on its
risk profile. It involves classification, measurement, observing and calculating
risks to ensure that
a) The persons who handle risks clearly realize it.
b) The organization’s Risk experience is within the limits
established by Board of Directors.
c) Risk taking Decisions are in line with the business
strategy and objectives set by BOD.
d) The expected payoffs compensate for the risks taken
e ) Risk taking decisions are explicit and clear.
f) Sufficient capital as a buffer is available to take risk
Risk management as generally supposed
does not mean minimizing risk; rather the goal of risk management is to optimize
risk-return trade -off. Despite the fact that many organizations are in the
business of taking risk, it should be known that an organization need not connect
in business in a manner that needlessly compels risk upon it: nor it should soak
up risk that can be transferred to other Introduction.
