Risk Management in Banking Industry

Abstract

Rising global competition, increasing deregulation, introduction of innovative products and delivery channels have pushed risk management to the forefront of today’s banking. Ability to predict risks and take appropriate position is the key to success. It can be said that risk takers will survive, effective risk managers will prosper and risk averse are likely to perish. In the regulated banking environment, banks had to primarily deal with credit or default risk. As the economy move into a perfect market economy, it has to deal with a whole range of market related risks like exchange risks, interest rate risk, etc. Operational risk, which had always existed in the system, would become more pronounced in the coming days as we have technology as a new factor in today’s banking. Traditional risk management techniques become obsolete with the growth of derivatives and off-balance sheet operations, coupled with diversification. The expansion in E-banking will lead to continuous vigilance and revisions of regulations.