RISK CONTROL

Credit Risk Control

Credit risk is the risk of loss arising from a borrower's failure to repay a loan or meet other credit obligations. Banks employ credit risk control measures such as thorough credit analysis, setting appropriate credit limits, collateral requirements, diversification of loan portfolios, and continuous monitoring of borrower creditworthiness to mitigate this risk.

Market Risk Control

Market risk refers to the potential losses banks may face due to changes in market conditions such as interest rates, exchange rates, and asset prices. Banks manage market risk through techniques such as hedging, diversification of investment portfolios, stress testing, and using derivatives to mitigate exposure to adverse market movements.

Liquidity Risk Control

Liquidity risk is the risk that a bank may not have enough liquid assets to meet its short-term financial obligations. Banks control liquidity risk by maintaining sufficient reserves, monitoring liquidity ratios, developing contingency funding plans, and managing asset-liability mismatches to ensure they can meet withdrawal demands and funding needs.

Operational Risk Control

Operational risk arises from internal processes, systems, or external events that could disrupt bank operations or result in financial losses. Banks implement operational risk control measures such as internal controls, robust IT systems, staff training, business continuity planning, and fraud detection mechanisms to minimize the likelihood and impact of operational failures.

Compliance Risk Control

Compliance risk refers to the risk of legal or regulatory sanctions, financial losses, or reputational damage resulting from non-compliance with laws, regulations, or industry standards. Banks control compliance risk by establishing compliance policies and procedures, conducting regular compliance audits, staying updated on regulatory changes, and implementing internal controls to ensure adherence to applicable laws and regulations.

Strategic Risk Control

Strategic risk involves the risk of losses resulting from ineffective strategic decision-making, including factors such as changes in market dynamics, competitive pressures, technological disruptions, or inadequate response to emerging trends. Banks manage strategic risk by conducting comprehensive strategic planning, scenario analysis, risk assessments, and monitoring key performance indicators to align business strategies with long-term objectives and mitigate potential risks.

Risk Governance

Effective risk control in banking also requires robust risk governance frameworks, which include clear roles and responsibilities for risk management, oversight by the board of directors and senior management, risk appetite statements, and regular reporting mechanisms to ensure accountability and transparency in managing risks across the organization.