StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Risk Management Overview - Essay Example

Cite this document
Summary
Risk Management Overview Instructor Institution Date Risk Management Overview Organizational risk is a situation where a business organization is exposed to uncertainty on the returns of its investments due to exposures of business hazards such as credit default (Breeden and Whisker, 2010)…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER92.1% of users find it useful
Risk Management Overview
Read Text Preview

Extract of sample "Risk Management Overview"

Download file to see previous pages

A business may not be able to run without all these basic activities and it is also likely to collapse. Business risks are usually categorized into two groups; systematic and unsystematic business risks. Systematic risk is where the economy generally experiences a downfall due to natural calamities floods and drought, political instability, recessions, inflation or even fluctuation in currencies. Any business operating under the same economy is bound to fail or make more losses than profits (Akhter, 2010).

Unsystematic risk is where a specific section of the economy or industry fails unlike systematic where it’s the overall market (Sensarma and Jayadev, 2009). The common way of counter attacking this is to employ diversification. Business risks are further categorized into strategic, compliance, financial and operational. Strategic is where there is new competition in the market, compliance is where a certain business is responding to new terms and regulations that have been newly put in place to run businesses.

Additionally financial business risk is where for instance several customers are unable to pay back to the business and operational business risk is when for example there is burglary to the business (Akhter, 2010). The banking as an industry has risks associated with it. One of them is aggressive and almost philanthropic lending of loans to clients and selling the loans to other financial institutions and hoping to run entirely on the interest generated from it, usually with an aim of maximizing profit (Akhter, 2010).

This becomes a risk when the economy collapses, experiences inflation or recession because with that, comes an automatic delay in loan servicing and sometimes the money given out looses its value with time because of currency fluctuation. Most banks are involved in lending. This involves a bank client giving a security pledge to a bank that they are able to pay back or service their loans fully. It is usually called collateral. It can be land, car or a house (Sensarma and Jayadev, 2009). In order to maximize their profit and returns, banks have increased their interest rates.

This poses such a risk to the banking system because with increased interest rates comes with an exponential reduction in lending activities. This is because not so many clients are wiling or able to pay for a higher than normal interest rates, so they don’t take loans all the same. This creates a financial confusion which the bank has to solve lest it collapses completely (Devine, 2006). To solve this, banks have to lower their lending standards and attracting more clients by using new in the market methods.

Liquidity risk is a type of risk that results from the unavailability of a proper market for an investment that cannot be sold fast enough in order to counter attack a foreseen loss (Akhter, 2010). Banks have severally taken houses or antiques as collateral from clients. When the clients are not able to service these loans on time the banks decide to sell these collateral. Antique is one of the hardest items to sell in the markets because not so many people know their value and there is never ready market for them (Breeden and Whisker, 2010).

Many banks suffer loss before recovery before selling such products and may never sell it completely leading a major loss. Liquidity risk therefore leads to a situation where the banking institution is unable to meet it objectives or profit

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Risk Management Overview Essay Example | Topics and Well Written Essays - 750 words”, n.d.)
Risk Management Overview Essay Example | Topics and Well Written Essays - 750 words. Retrieved from https://studentshare.org/management/1449942-risk-management-overview
(Risk Management Overview Essay Example | Topics and Well Written Essays - 750 Words)
Risk Management Overview Essay Example | Topics and Well Written Essays - 750 Words. https://studentshare.org/management/1449942-risk-management-overview.
“Risk Management Overview Essay Example | Topics and Well Written Essays - 750 Words”, n.d. https://studentshare.org/management/1449942-risk-management-overview.
  • Cited: 0 times

CHECK THESE SAMPLES OF Risk Management Overview

Oil and Gas Contract Law

OIL AND GAS CONTRACT LAW Overview of Contractual risk management The Oil and Gas industry is certainly an industry that can be described as the heartbeat of industrialization of the world.... A typical example of such factors has to do with contractual risk management.... Generally, contractual risk management has to do with an integrated process and responsibility of reviewing, analyzing and evaluating contractual risks of pending agreements so that once the agreements are executed, there would not have any repelling risk effects for the parties involved (Taverne, 2008, p....
13 Pages (3250 words) Essay

Software risk management

Name Instructor Date Software risk management Abstract Software risk management is a concept that is used to identify and control risks in an organization that deals with software development.... risk management programs are designed to control the risks and provide a detailed plan to protect the project from the risks.... hellip; risk management is a process includes several components like risk identification, risk assessment and risk control....
4 Pages (1000 words) Essay

Take Home Final for Information Assurance and Management Class

Author: Professor: Course: Date: Information Assurance and management Class The best approach for information assurances and security strategy in a big company is; a top-down approach.... A large company needs a system that provides assurances from the top down because the top management hold most of the crucial information and this makes them more venerable compared to other workers.... A system should be created that seek, to protect and minims available threat among top management this is because of, crucial information that the person holding these offices have....
3 Pages (750 words) Research Paper

An analysis of the financial crisis and collapse of Lehman Bros

… The international banking system had, prior to the crisis, become an inter-dependent system involving the Central Banks of many developed nations supported by the role of private and corporate investors in hedging against risk factors associated with wealth management.... were unable to find appropriate buyers for many derivatives that were backed by the high volume of home mortgages granted to higher-risk consumer segments prior to 2007....
12 Pages (3000 words) Essay

Barclays Bank: Viewing Principles of Finance at Work

Correspondingly, market efficiency theories will also be applied to process the risk management techniques and its effectiveness in managing the portfolio effectively.... It is worth mentioning in this regard that taking into concern its portfolio risk management strategies, Barclays is considered to be one of the best and the largest banks for managing capital market portfolios.... On the basis of the above mentioned businesses, the bank can be observed to have applied different risk management strategies....
10 Pages (2500 words) Essay

Operations management

Additionally, the major strength of the article is that the research question on Risk Management Overview is well defined.... The article defines risk management as activities that integrate the risk assessment, risk recognition, develop management strategies, and mitigates risk with the help of managerial resources.... Some of the conventional risk management, focuses on stemming the risks from legal or… The article also defines the financial risk management, where it asserts that the financial risk management is focussed on the risks that can be easily managed with the help of traded financial instruments....
10 Pages (2500 words) Essay

Veterinary Clinic Automation Project

he Happy Tails Veterinary Clinic risk management Assessment (RMA), similar to a schedule, outlines five major tasks with subordinate tasks and sub-subtasks that range from the Initiation Phase that define the project requirements to the Closeout Phase that involve training users and evaluating project success.... employees are Project management Professional Certification certified (PMP) and dedicated to Happy Tails Veterinary Clinic's goal of implementing a clinic wide IT System upgrade....
11 Pages (2750 words) Research Paper

Risk Analysis Methods

As per the DHS strategic plan 2008-13, since it is not feasible to secure the United States again all possible forms of attacks that may occur or any other threats that may arise, they have made risk management as the primary basis of policy and resource allocation decision making.... A principal of US coast guard operation is risk management.... The first step in the risk management model is to understand the risk that is existent in the system....
9 Pages (2250 words) Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us