Risk and Risk Management
Risk and Risk Management
Risk and Risk Management
Capital Adequacy
Module 2
100
What are the risk mitigation strategies (atleast 2)?
1. Accept
2. Minimize (Mitigate)
3. Share
4. Transfer
5. Avoid
100
How many steps are there in the risk management process and what are they?
Step 1. Identify hazards.
Step 2. Assess hazards to determine risks.
Step 3. Develop controls and make risk decisions.
Step 4. Implement controls.
Step 5. Supervise and evaluate.
100
List 2 ways to identify risk?
* Brainstorming meetings
* Expert opinion
* Past history
* Multiple (team based) assessments
100
The Basel Committee on Banking Supervision was established by
the central bank governors of the G-10 countries
100
How are Ponzi schemes identified?
(i) high investment returns with little or no risk;
(ii) overly consistent returns;
(iii) unregistered investments;
(iv) unlicensed sellers;
(v) secretive and complex strategies; and,
(vi) issues with paper work.
200
How do you manage market risk?
Hedge
swap
arbitrage
Speculation
200
Identify two tools of risk management?
(i) organisational strategy;
(ii) risk reviews;
(iii) mitigation and management (SWOT analysis); and,
(iv) Porter’s Five Force Model.
200
What are SWOT analysis good for?
Competitor analysis
Assessing opportunities
Risk assessment
Reviewing corporate strategy
Strategic planning
200
What is the importance of Capital Adequacy (atleast 3)?
1) Provide a cushion to absorb unanticipated losses (ex: a crisis)
2) Reduce moral hazard incentives created by deposit insurance and "too-big-to-fail" policies.
3) Preserve confidence in the FI, and avoid runs by depositors (so secured AND unsecured depositors are confident in the bank's safety)
4) Protect uninsured depositors and other stakeholders.
5) Protect deposit insurance funds and taxpayers.
6) Protect owners against increases in insurance premiums (in book)
7) To fund the branch and other real investments. (in book)
200
What is a Management Information Systems?
A management information system is an information system used for decision-making, and for the coordination, control, analysis, and visualization of information in an organization.
300
List atleast 2 objectives of risk reporting
300
Porter's Five Forces Model consists of:
1. Threat of new entrants
2. Threat of substitutes
3. Bargaining power of suppliers
4. Bargaining power of buyers
5. Competitive rivalry
300
What are controls?
Controls are actions taken to eliminate hazards or reduce their risk
300
The Year that The Basel Committee on Banking Supervision was established
1974
300
What is the Securities Exchange Commission (SEC)?
Oversees securities transactions, activities of financial professionals and mutual fund trading to prevent fraud and intentional deception.
400
What is risk reporting?
400
What parts of a SWOT analysis are internal and what parts are external?
Strengths and weaknesses are internal to your company—things that you have some control over and can change.
Opportunities and threats are external—things that are going on outside your company, in the larger market.
400
What is credit risk?
the risk that a borrower will not repay a loan according to the terms of the loan, either defaulting entirely or making late payments of interest or principal.
400
What is the Role of Capital in the Recent Financial Crisis ?
-During the crisis, many banks ran low on capital because of losses on real estate-related assets.
-Recall that most large banks raised more capital than they lost on their books (although they likely lost a lot more in market value terms).
-The government stepped in anyway to restore public confidence with TARP and injected preferred equity into all of the largest banks and many small banks, 709 institutions in total.
400
Explain the concept of E-Money?
Digital currency is electronic money that only exists in the digital world and not physically. Digital currencies are present in many common transactions made today, like when using PayPal, Venmo, or even online banking
500
Explain the risk management principle: VALUE ADDED
Value added is that extra feature a company adds to its products and services before offering them to customers.
500
List 2 SWOT Analysis Advantages
-Simple and quick
-Wide range of applications
-Helps determine organization's positioning the market = aids in formulation of business strategy
-Encourages proactive thinking and foresight with decision making
-Reduces risks of decision making by demanding thoughtfulness
500
What is risk management?
Risk management is the process of identifying, assessing, and controlling risks arising from operational factors and making decisions that balance risk costs with mission benefits.
500
What is the reason The Basel Committee on Banking Supervision was established
to promote sound bank supervisory standards worldwide - it focuses on banks and supervision of banks
500
What is the importance of Foreign Account Tax Compliance (FATC)?
The Foreign Account Tax Compliance Act (FATCA) is a tax law that compels U.S. citizens at home and abroad to file annual reports on any foreign account holdings.