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

The types of perils and risk counsel measures which are needed in a fiscal institution - screen ExampleThe paper tells that risk is always going to be present in a pecuniary institution and the higher the risk, the higher the egress that the institution gets. Basically, risk and return are related in the same direction. A minor example of this would be a bank charging different interest order on different individuals who have opted for the same loan. The individual who has a relatively poor credit narration is likely to receive a higher interest rate as at that place are chances of him/her non 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 huge losses if the financial institution is not ready to deal with it. Risk management is a type of strategy which every financial institution needs to have at its centre and there are several par ts involved in this including monitoring the risks, measuring these risks and controlling risks. It is the abstract 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 incredulity 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 determinants of the financial stability of a bank. Systematic risk is in like manner known as diversifiable risk. Basically, this particular type of risk means the risk of the castrate of asset repute associated with systematic factors. Therefore, the risk cannot be fully diversified. There are several subcategories under systematic risks and there are various ways in which the value of an asset can be affected. The determinant of the change in the value of the assets owned by the institution and it depends upon natural and economic factors including interest rates touch on the value of the assets, an increase in inflation capability 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