A Study on Risk Management in Banking Industry Essay

Risk heed is relatively new and emerging apply as far as Indian coin brinks are concerned and has been proven that its a mirror of high-octane corporate governance of a financial institution. Globalization and significant competition between foreign and house servant banks, survival and optimizing returns are very crucial for banks and financial institutions. However, selecting the efficient customer and providing innovative and value added financial products and services are another dominant factors.In a volatile and dynamic market place for achieving sustainable job concern growth and shareowners value, it is essential to develop a link between essays and rewards of all products and services of the bank. Hence, the banks should encounter efficient danger management model to mitigate all internal and external assays. The intention of this study is to envisage ideal framework of bank-wide risk management for Indian Banks. The presence of accurate measures of bank-wide risk management practice increase shareholders returns and allows the risk-taking behavior of bank to be more closely line up with strategic objectives. Bank-wide risk management practice should aim to enhance the drivers of shareholders value such as 0 Growth1 Risk adjusted performance measurement2 Consistency of lucre and3 Quality and transparency of management.The important steps of the efficient framework of banking concern should ensure all risks are identified, prioritized, quantified, controlled and managed in order to accomplish an optimal risk-reward profile. This entails ideal and dedicated coordination of risk management across the banks various business units. However, the approach to monitoring and enforcing the adherence of business units within the bank may vary. The factors that influence this finish are 4 The feasibility decisions of the business unit. 5 The regulatory requirements in respect of the business unit. 6 The hail of effective monitoring and controll ing steps. Risk management is a line function that needs to be addressed by each individual cost center and business unit. However, a centralise bank-wide risk management framework has certain advantages for the Bank.The advantages are 7 upward(a) capital efficiency by providing an objective basis for allocating resources reducing expenditures on immaterial risks and exploring natural hedges and portfolio effects 8 Supporting informed decision making by uncovering areas of high potential adverse equal on drivers of share value, and identifying and exploiting areas of risk-based advantage context. 9 Building investor confidence by establishing a process to stabilize results by protecting them from disturbances, and demonstrating proactive risk stewardship 10 Define cost and profitability centers11 Profitability and cost allocation on customer, product, services and branch wide Most of the banks do not have dedicated risk management team, policy, procedures and framework in place. Those banks have risk management department, the risk managers procedure is restricted to pre-fact and post-fact analysis of customers credit and there is no segregation of credit, market, operational and strategic risks. There are few banks have articulated framework and risk quantification. However, the outputs are far from the stressed or actual losses due to usage of un-compatible implications.The traditional lending practices, judicial decision of credits, handling of market risks *, treasury functionality and culture of risk-rewards are hauls of public sphere of influence banks. Where as private sector banks and financial institutions are some-what better in this context.The sheer size and wide coverage of banks is a big vault to integrate and generate a cost effective real season operational data for mapping the risks. Most of the financial institutions processes are form to functional silos follows bureaucratic structure and yet to come up with a transparent and appropr iate corporate governance structure to achieve the express strategic objectives.CONCLUSIONThere are many banks like HSBC, Citibank, Deutsche bank have bank-wide risk management practice which contributed in their global conquest whereas banks and institutions like Sumitomo Corp, Barings, Bank of America, CSFB and UTI have failed due to lack of efficient bank-wide risk management practice (compliance and operational risks). So the above comments emphasis the need of having bank-wide risk management to achieve the stated strategic objectives in a competitive, volatile and dynamic market conditions in an emerging Indian economy. We conceptualise the above-described bank-wide risk management framework is easy workable, cost effective and efficient process without any hassles or hurdles of high-tech tools and techniques