A Study on Risk Management in Banking Industry Essay

Risk management is relatively tender and emerging behave as far as Indian banks atomic number 18 concerned and has been proved that its a mirror of efficient corporate governance of a financial institution. Globalization and significant controversy between foreign and domestic banks, survival and optimizing returns are very crucial for banks and financial institutions. However, selecting the efficient guest and providing innovative and value added financial products and services are another paramount factors.In a mercurial and dynamic grocery store place for achieving sustainable business growth and conductholders value, it is essential to pullulate a link between bumps and rewards of all products and services of the bank. Hence, the banks should have efficient take a chance management textile to mitigate all internal and external ventures. The objective of this study is to envisage ideal framework of bank-wide risk management for Indian Banks. The presence of accurate m easures of bank-wide risk management behave increase shareholders returns and allows the risk-taking behavior of bank to be more closely aligned with strategical 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 earnings and3 Quality and transparentness of management.The important steps of the efficient framework of banking concern should ensure all risks are identified, prioritized, quantified, controlled and managed in tell to achieve an optimal risk-reward profile. This entails ideal and dedicated coordination of risk management across the banks mixed business units. However, the approach to monitoring and enforcing the adherence of business units within the bank may vary. The factors that influence this purpose are 4 The feasibility decisions of the business unit. 5 The regulatory requirements in respect of the business unit. 6 The cost of effective m onitoring and controlling steps. Risk management is a line function that needs to be addressed by each individual cost center and business unit. However, a alter bank-wide risk management framework has certain advantages for the Bank.The advantages are 7 Improving capital efficiency by providing an objective basis for allocating resources reducing expenditures on immaterial risks and exploring natural hedges and portfolio effects 8 Supporting sensible decision making by uncovering areas of high potential adverse impact 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 defend them from disturbances, and demonstrating proactive risk stewardship 10 Define cost and profitability centers11 Profitability and cost storage allocation on customer, product, services and branch wide approximately of the banks do not have dedicated risk management team, policy, p rocedures and framework in place. Those banks have risk management department, the risk managers intention is restricted to pre-fact and post-fact analysis of customers credit and there is no segregation of credit, market, operational and strategic risks. at that place are few banks have articulated framework and risk quantification. However, the outputs are far from the hard put or actual losses due to usage of un-compatible implications.The traditional lending practices, assessment of credits, handling of market risks *, treasury functionality and culture of risk-rewards are hauls of public sector 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 hurdle to combine and generate a cost effective real time operational data for mapping the risks. Most of the financial institutions processes are encircled to functional silos follows bureaucratic structure and yet to come up with a transparent and appropriate corporate governance structure to achieve the stated strategic objectives.CONCLUSIONThere are many banks like HSBC, Citibank, Deutsche bank have bank-wide risk management practice which contributed in their globular success 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 necessity 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 believe the above-described bank-wide risk management framework is easy workable, cost effective and efficient process without any hassles or hurdle race of high-tech tools and techniques