Banks are in business in order to generate returns for their stakeholders. To achieve this, they must take risks and embed them in the products and services they provide. Risk management has become ever more important as the complexity of banking has increased and regulators attempt to more closely match capital with risk profiles. From a regulator’s point of view, the most desirable aspect of banking is survivability rather than profitability – and the key to survivability is risk management.
The prerequisite for this module is that you should have a solid understanding of the concepts discussed in the following tutorial – ‘Financial Markets – An Introduction’
This tutorial looks at the following;
– the links between risk, return, and survival,
– outlines the main types of risks that banks face
– the key elements of an effective framework for the management of these risks.
On completion of this tutorial, you will be able to:
– explain how a bank is a ‘risk factory’ and how regulators are concerned about survival in the face of these risks
– describe the fundamentals of the risk management process in a bank
– outline the major categories of risk that banks must address