BUISENESS MANAGEMENT
RISK MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The risk of failure of one bank due to the failure of another banks or a group of banks fail due to contagion effect.
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Total risk comprises systematic risk and unsystematic risk as postulated by capital asset pricing model.
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Risks originating from banking activities such as credit risk from lending activities, liquidity risk from the bank’s inability to meet claims and immediate obligations due to liquidity constraints.
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Types of risks which are within the control of the banks to manage
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Detailed explanation-1: -Financial risk refers to your business’ ability to manage your debt and fulfil your financial obligations. This type of risk typically arises due to instabilities, losses in the financial market or movements in stock prices, currencies, interest rates, etc.
Detailed explanation-2: -Financial risk refers to the likelihood of losing money on a business or investment decision. Risks associated with finances can result in capital losses for individuals and businesses. There are several financial risks, such as credit, liquidity, and operational risks.
Detailed explanation-3: -Systematic Risk It is a financial risk that cannot be predicted or avoided due to several factors. For example, a pandemic, political climate, and so on that result in inflation, increased interest rates, and increased market volatility.
Detailed explanation-4: -There are many ways to categorize a company’s financial risks. One approach for this is provided by separating financial risk into four broad categories: market risk, credit risk, liquidity risk, and operational risk.