Reference no: EM132951786

Risk Management in Banking Institutions

Learning Outcome 1: evaluate how market risk is identified, measured and mitigated

Learning Outcome 2: discuss the drivers of operational risk management, the categories of operational risks encountered by financial institutions and how financial institutions manage risks within an operational risk management framework.

Learning Outcome 3: know the major models utilized in operational, credit, market and liquidity risks and the benefits and limitations of modelling

The scenarios and tasks are listed below:

Scenario 1

Banking institutions are facing challages and competition from external environment. Many banks competing each other to multiply their profits by introducing different banking products and services to their customers. In other words, the market risk is one of the major challenges that the banks are supposed to be addressed appropriately to achieve their annual targets. In the meantime, the deposits of the customers need to be invested in appropriate sources to multiply the return to make profits for the bank.

Identify and explain with suitable explanation of market risks and investment risks of a banking institutions? You are required to use examples to demonstrate your understanding of different types of market and investment risks.

Task 2
You are required to make use of following information of ANZ Bank for the year ended 31st December 2020 to calculate.
a) Net interest income
b) Profit before taxes

• Fee income for the year ended 31st December 2020 is OMR 6.25 million.
• Total overhead expenses for the year ended 31st December 2020 is OMR 23.5 million.

Scenario 2

Operational risk is the risk of some adverse outcome resulting from acts undertaken (or neglected) in carrying out business activities, inadequate or failed internal processes and information systems, misconduct by people or from external events and shocks. Operational risk is a generic risk present in operations which exists even before any deposit is accepted or a credit is granted by a bank. Operational risk is considered as a risk characterised by idiosyncrasy. Financial institutions, especially the banks worldwide have been seen placing increased emphasis on the management and measurement of operational risk. Modern approach of Operational Risk management which particularly stresses its measurement and linkage with the bank capital adequacy is considered as a new frontier of value creation and efficiency in banks. The need of an explicit capital charge to address a banks? operational risk exposure has been felt by the Basel Committee of Banking Supervision (BCBS), as many banking institutions in the developed countries were shaken by mega operational failures emanating from events of fraud, technological failure or due to control breakdowns resulting in collapse of age old financial institutions like, Barings Bank of UK, Daiwa of Japan etc.

Task 1 Explain briefly what are the different types of operational risks affecting the banking institutions?

Task 2 Explain the Operational Risk Management (ORM) process and critically evaluate how ORM process would support to improve the operational risk management process of a bank?

Scenario 3
In the world of banking, competition between commercial banks is increasing more and more. Lenders are trying to satisfy customers in various credit services, which include lending services. To keep themselves in the play, banks focus on improving credit growth. However, higher credit growth will not truly bring higher profits if banks fail to manage credit risk.

Task 1 Evaluate the importance of managing credit risk management framework of a bank appropriately and discuss the different sources of credit risks in a banking institution?

Task 2 Discuss the 5 Cs of credit risk management of a banking institutions?

1. 3 people in a group 2000 +1000 + 500 = 3500 words
2. 4 People in a group 2000 + 1000 + 500 + 250 = 3750 Words
3. 5 people in a group 2000 +1000 +500 + 250 + 125= 3875 words.

Attachment:- Risk Management in Banking Institutions.rar