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Risk management in the bank

The main task of risk management in the bank is to maintain acceptable ratios of profitability with safety and liquidity indicators In the process of managing the bank 's assets and liabilities, i.e. minimizing bank losses.

Effective risk management in the bank should solve a number of problems, from risk tracking (monitoring) to its valuation. The level of risk associated with an event is constantly changing due to the dynamic nature of the external environment of banks. This forces the bank to regularly refine its place in the market, assess the risk of certain events, review its customer relations and assess the quality of its own assets and liabilities, and therefore adjust its risk management policy.

The risk management process at the bank includes: anticipating risks, determining their likely dimensions and consequences, developing and implementing measures to prevent or minimize the associated losses.

All this implies the development of each bank 's own risk management strategy, that is, the basis of decision-making policy in such a way as to make timely and consistent use of all opportunities for bank development and at the same time keep risks at an acceptable and managed level.

The goals and objectives of the risk management strategy are largely determined by the ever-changing external economic environment in which the bank has to operate.

The bank should be able to choose risks that it can properly assess and manage effectively. Having decided to accept a certain risk, the bank should be ready to manage it, to track it, which requires mastering the skills of qualitative assessment of the relevant processes.

The bank risk management should be based on the following principles:

  • Prediction of potential sources of loss or situations likely to cause loss, their quantitative measurement;
  • financing risks, economic incentives to reduce them;
  • responsibility and responsibility of managers and employees, clarity of risk management policies and mechanisms;
  • coordinated risk control across all branches and services of the bank, monitoring the effectiveness of risk management procedures.

The final, critical step in the risk management process is to prevent or minimize risks. Appropriate methods together with risk recovery methods constitute the content of so-called risk management.


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