MANAGEMENT

Detailed explanation-1: -The major risks faced by banks include credit, operational, market, and liquidity risks. Prudent risk management can help banks improve profits as they sustain fewer losses on loans and investments.

Detailed explanation-2: -Through a financial intermediary, savers can pool their funds, enabling them to make large investments, which in turn benefits the entity in which they are investing. At the same time, financial intermediaries pool risk by spreading funds across a diverse range of investments and loans.

Detailed explanation-3: -There are five generic risks to these financial institutions: systematic, credit, counterparty, operational, and legal. Systematic risk is the risk of asset value change associated with systemic factors. As such, it can be hedged but cannot be completely diversified.

Detailed explanation-4: -What Is Credit Exposure? Credit exposure is a measurement of the maximum potential loss to a lender if the borrower defaults on payment. It is a calculated risk to doing business as a bank.