MS-494 Risk Management in Banks

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ASSIGNMENT

Course Code                                                                      :                               MS-494

Course Title                                                                       :                               Risk Management in Banks

Assignment Code                                                            :                               MS-494/TMA/SEM-I/2016

Coverage                                                                             :                               All Blocks

Note: Attempt all the questions and submit this assignment on or before 30th April, 2016 to the Coordinator of your Study Centre.

Question.1. Explain the measures that are taken by the Reserve Bank of India while devising the regulatory framework for Banks.

Answer:The Indian banking industry is governed by a very diligent regulatory and supervisory framework. The Reserve Bank of India is the primary regulatory body for all banks in India. The RBI is the central bank of the country and is responsible for managing the operations of the entire financial system. The legal framework which governs the banking industry includes some umbrella acts like the RBI Act (1934) and the Banking Regulation Act (1949) that applies to all activities of all banking companies and other acts like the Companies Act (1956), Banking Companies Act, SBI Act (1955), Regional Rural Bank Act (1976), Bankers’ Books Evidence Act (1891), SARFAESI act (2002) and Negotiable Instruments Act (1881). The Reserve Bank

Question.2. Visit a Bank of your choice and discuss with the Manager the credit risk associated with the different banking products and how it is managed. Write a note on your discussion.

Answer:When ecommerce was first introduced as a new concept there was a common belief that it was expensive and difficult to implement.  In truth, when ecommerce first came into existence it was often expensive and complicated to setup.  This was true from both the Visa / MasterCard card acceptance perspective, and also from the technology / shopping cart perspective.

If we fast forward to today ecommerce is common place.  Technologies like Shopify exist to make ecommerce affordable and accessible to even the smallest

Question.3. Discuss the importance of Currency Risk Management and explain how it is managed.

Answer:Foreign exchange risk (also known as FX risk, exchange rate risk or currency risk) is a financial risk that exists when a financial transaction is denominated in a currency other than that of the base currency of the company. Foreign exchange risk also exists when the foreign subsidiary of a firm maintains financial statements in a currency other than the reporting currency of the consolidated entity. The risk is that there may be an adverse movement in the exchange rate of the denomination currency in relation to the base currency before the date when the transaction is completed. Investors and businesses exporting or

Question.4. Discuss the different approaches for Operational Risk analysis and measurement bringing out their advantages and disadvantages.

Answer:There are two main drivers for this development. Firstly, there is a growing acknowledgement from banks that a consistent and effective operational risk management framework can help them achieve organizational objectives and superior performance. For example, by including a well-constructed operational risk process in the entire value chain, a bank can help ensure that the risks inherent in those activities are understood and addressed. In many instances an early involvement of operational risk management can increase the development speed of new initiatives.

Question.5. Visit a Bank of your choice and find out the role of the Chief Risk Officer in that Bank. Write a note on your discussions.

Answer:The chief risk officer (CRO) or chief risk management officer (CRMO) of a corporation is the executive accountable for enabling the efficient and effective governance of significant risks, and related opportunities, to a business and its various segments. Risks are commonly categorized as strategic, reputational, operational, financial, or compliance-related. CROs are accountable to the Executive Committee and The Board for enabling the business to balance risk and reward. In more complex organizations, they are generally

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