The types of risks and risk management measures which are needed in a Essay - 1

The types of take a chances and risk management measures which atomic number 18 needed in a financial institution - Essay ExampleThe paper tells that risk is ever going to be present in a financial institution and the higher the risk, the higher the return that the institution gets. Basically, risk and return are colligate in the akin direction. A minor example of this would be a bank charging different interest come ins on different individuals who have opted for the same loan. The individual who has a relatively poor credit history is likely to receive a higher interest rate as there are chances of him/her not paying the loan bank. Therefore, there is a higher risk and the bank gets a higher return through the higher interest rate charged. However, risk needs to be managed and there can be several(prenominal) huge losses if the financial institution is not ready to deal with it. lay on the line management is a type of strategy which every financial institution needs to have at its core and there are several part involved in this including monitoring the risks, measuring these risks and controlling risks. It is the analysis of risk mixed with the element of quality risk controls. Risk management is required by banks and financial institutions as a safety measure to protect the institution from any major financial problems. The uncertainty and the potential inherent risks that come with the financial markets makes it important for most of the financial institutions and banks to use risk management. The risk management controls are one of the major clinchers of the financial stability of a bank. Systematic risk is also known as diversifiable risk. Basically, this particular type of risk means the risk of the change of asset value associated with systematic factors. Therefore, the risk cannot be amply diversified. There are several subcategories under systematic risks and there are various ways in which the value of an asset can be affected. The determ inant of the change in the value of the assets owned by the institution and it depends upon natural and economic factors including interest rates affecting the value of the assets, an increase in pomposity might cause an increase in fuel prices which might affect transportation and stock value and changes in economic conditions which may cause several changes in the value of