THE NATURE OF RISK FOR BANKING INSTITUTIONS CAN BE CATEGORIZED INTO TWO TYPES:

RISK MANAGEMENT

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	Systematic risk and unsystematic risk
B	Financial risks and non-financial risks
C	Risk appetite and risk tolerance
D	Credit risk and liquidity risk

Explanation:

Detailed explanation-1: -The two major types of risk are systematic risk and unsystematic risk. Systematic risk impacts everything. It is the general, broad risk assumed when investing. Unsystematic risk is more specific to a company, industry, or sector.

Detailed explanation-2: -Financial risks are reflected in the financial positions on banks’ balance sheets and result from their risk-taking activity. Nonfinancial risks arise from the bank’s operations (processes and systems) and are similar to risks faced by companies outside the financial sector (“corporates”).

Detailed explanation-3: -Credit risk, market risk, and liquidity risk are classified as financial risks. Model risk, solvency risk, tail risk, operation risk, and legal risk are examples of non-financial risk.

There is 1 question to complete.

BUISENESS MANAGEMENT

RISK MANAGEMENT