RISK MANAGEMENT

In the intricate world of finance, risk management stands as a cornerstone of sound decision-making and financial stability. This section delves into the multifaceted nature of risk, exploring its identification, assessment, classification, and profound impact on profitability. The Basel Committee on Banking Supervision (BASEL) has outlined key areas of risk management, encompassing risk identification, assessment, classification, policies, limits, rating, estimation, management systems, supervision, and risk-based auditing.

A scientific approach to risk management has yielded valuable outcomes, including risk quantification, risk-adjusted pricing, risk-adjusted rate of return, and risk-related capital norms. These tools empower financial institutions to make informed decisions that balance risk and reward.

This concise overview aims to serve as a refresher for bankers, enabling them to refine their risk judgment, for which there is no substitute. By comprehending the intricacies of risk management, bankers can navigate the financial landscape with greater confidence and prudence.