This is the first 1,000 characters of 502 words (2.01 pages) in the essay titled Risk Management
Risk Management For Banking Companies
Risk management is the process of assessing risk and developing strategies to manage the risk. In ideal risk management, a prioritization process is followed whereby the risks with the greatest loss and greatest probability of occurring are handled first.
In practice the process can be very difficult, and balancing between risks with high probability of occurrence but lower loss & risks with high loss but lower probability of occurrence can often be mishandled.
Financial firms face four common risks:
Market risk refers to possibility of incurring large losses from adverse changes in financial asset prices, such as stock prices. Standard risk management involves use of statistical models to forecast probabilities & magnitudes of large adverse price changes.
Credit risk is the risk that a firm’s borrowers will not repay their debt obligations in full. The traditional method for managing credit risk is t...
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