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INTRODUCTION

1.1 Risk management functions

CONCLUSION

Bibliography

INTRODUCTION

The development of the domestic economy, market principles of management, the emergence of numerous forms of financial relations are important prerequisites for the emergence of new types of economic relations in all areas of social, financial and industrial activity.

At the same time, the banking system acts as the most important link between market participants, finances of subjects of various sectors of the economy, states and financial spheres, which makes it necessary to ensure adequate compliance of the activities of credit institutions with the peculiarities of the external environment.

Management is the main mechanism that determines the financial stability, competitive advantages and market success of a credit institution, therefore its quality plays a fundamental role in the results of managing the bank's activities, strategy, and risks.

The ongoing integration of Russia into the global financial and economic system contributes to an increase in the dependence of the economy of our country on negative factors and processes occurring abroad. Crisis phenomena in the global financial market and related problems of reducing bank liquidity in 2007-2008, as well as an increase in the cost of resources allocated for lending, affected the Russian financial market and made banks face the need to find not only ways to attract sufficient funds, but also the most efficient placement. At the same time, the excessive desire of banks to maximize their share in the market of banking products and services inevitably leads to an increase in the level of risks and makes financial intermediaries vulnerable to adverse environmental factors. This situation is becoming a serious test for the management of banks, designed to ensure, among other things, the stability of the credit institution. That is why the problem is the organization of professional risk management that meets modern requirements.

This course work outlines the essence, content, functions and main stages of organizing risk management, characterizes risk management on the example of a particular bank - "Asia-Pacific Bank" (OJSC) and considers one of the tools for managing credit risk - credit risk management .

CHAPTER 1. ESSENCE AND CONTENT OF RISK MANAGEMENT

1.1 Risk management functions

Risk is a financial category. Therefore, the degree and magnitude of risk can be influenced through the financial mechanism. Such an impact is carried out with the help of financial management techniques and a special strategy. Together, the strategy and techniques form a kind of risk management mechanism, i.e. risk management. Thus, risk management is a part of financial management.

Risk management is based on a targeted search and organization of work to reduce the degree of risk, the art of obtaining and increasing income (profit, profit) in an uncertain economic situation. The ultimate goal of risk management corresponds to the target function of banking. It consists in obtaining the greatest profit at the optimal ratio of profit and risk acceptable to the bank.

Risk management is a system for managing risk and economic, more precisely, financial relations that arise in the process of this management.

Risk management includes strategy and management tactics.

Management strategy refers to the direction and method of using funds to achieve the goal. This method corresponds to a certain set of rules and restrictions for decision making. The strategy allows you to focus on solutions that do not contradict the adopted strategy, discarding all other options. After achieving the goal, the strategy as a direction and means of achieving it ceases to exist. New goals set the task of developing a new strategy.

Tactics are specific methods and techniques to achieve the goal in specific conditions. The task of management tactics is to choose the optimal solution and the most appropriate management methods and techniques in a given economic situation.

Risk management as a management system consists of two subsystems: a managed subsystem (management object) and a management subsystem (management subject).

The object of management in risk management is risk, risky capital investments and economic relations between business entities in the process of risk realization. These economic relations include relations between the insured and the insurer, the borrower and the lender, between entrepreneurs (partners, competitors), etc.

The subject of management in risk management is a special group of people (financial manager, insurance specialist, acquirer, actuary, underwriter, etc.), which, through various methods and methods of management influence, performs the purposeful functioning of the management object.

The process of the influence of the subject on the object of control, i.e. the process of control itself can be carried out only if certain information is circulated between the control and controlled subsystems. The management process, regardless of its specific content, always involves the receipt, transmission, processing and use of information. In risk management, obtaining reliable and sufficient information under given conditions plays a major role, since it allows you to make a specific decision on actions under risk.

Information support for the functioning of risk management consists of various kinds and types of information: statistical, economic, commercial, financial, etc.

This information includes awareness of the likelihood of an insured event, an insured event, the presence and magnitude of demand for goods, capital, financial stability and solvency of its customers, partners, competitors, prices, rates and tariffs, including for the services of insurers, about insurance conditions, dividends and interest, etc.

Whoever owns the information owns the market. Many types of information are often subject to trade secrets. Therefore, certain types of information may be one of the types of intellectual property (know-how) and be made as a contribution to the authorized capital of the bank.

A highly qualified manager always tries to get any information, even the worst, or some key points of such information, or refusal to talk on this topic (silence is also a language of communication) and use them to his advantage. Information is collected bit by bit. These grains, collected together, already have a full-fledged informational value.

The financial manager's availability of reliable business information allows him to quickly make financial and commercial decisions, influences the correctness of such decisions, which naturally leads to a reduction in losses and an increase in profits. Proper use of information in transactions minimizes the likelihood of financial loss.

Every decision is based on information. The quality of information is important. The more vague the information, the more uncertain the decision. The quality of information should be assessed as it is received, not as it is transmitted. Information ages quickly, so it should be used promptly.

An economic entity must be able not only to collect information, but also to store and retrieve it if necessary.

Information plays an important role in risk management. A financial manager often has to make risky decisions when the results of an investment are determined and based on limited information. If he had more complete information, he could make a more accurate forecast and reduce risk. This makes information a commodity, and a very valuable one at that. The investor is willing to pay for complete information.

The cost of complete information is calculated as the difference between the expected cost of any acquisition or investment when complete information is available and the expected value when information is incomplete.

Risk management performs certain functions. There are two types of risk management functions:

l functions of the control object;

l functions of the subject of management.

The functions of the control object in risk management include the organization:

l risk resolution;

l risky investments of capital;

l work to reduce the magnitude of the risk;

l risk insurance process;

l economic relations and connections between the subjects of the economic process.

The functions of the subject of management in risk management include:

l forecasting;

l organization;

l regulation;

l coordination;

l stimulation;

l control.

Forecasting in risk management is a development for the future of changes in the financial condition of the object as a whole and its various parts. Forecasting is the prediction of a certain event. It does not set the task of directly implementing the developed forecasts in practice. A feature of forecasting is also the alternativeness in the construction of financial indicators and parameters, which determines different options for the development of the financial condition of the control object based on emerging trends. In the dynamics of risk, forecasting can be carried out both on the basis of extrapolation of the past into the future, taking into account expert assessment of the trend of change, and on the basis of direct prediction of changes. These changes may occur unexpectedly. Management based on anticipation of these changes requires the manager to develop a certain flair for the market mechanism and intuition, as well as the use of flexible emergency solutions.

Organization in risk management, it is an association of people who jointly implement a program of risky capital investment based on certain rules and procedures. These rules and procedures include: the creation of management bodies, the construction of the structure of the management apparatus, the establishment of relationships between management units, the development of norms, standards, methods, etc.

Regulation in risk management, it is an impact on the control object, through which the state of stability of this object is achieved in the event of a deviation from the specified parameters. Regulation covers mainly current measures to eliminate the deviations that have arisen.

Coordination in risk management is the consistency of the work of all parts of the risk management system, the management apparatus and specialists. It ensures the unity of relations between the object of management, the subject of management, the management apparatus and the individual employee.

Incentive in risk management is the motivation of financial managers and other professionals to be interested in the result of their work.

Control in risk management is a check of the organization of work to reduce the degree of risk. Through control, information is collected on the degree of implementation of the planned action program, the profitability of risky capital investments, the ratio of profit and risk, on the basis of which changes are made to financial programs, the organization of financial work, and the organization of risk management. Control involves the analysis of the results of measures to reduce the degree of risk.

1.2 Main stages of risk management organization

Risk management in terms of economic content is a system for managing risk and financial relations that arise in the process of this management.

As a management system, risk management includes the process of developing a risk goal and risky capital investments, determining the likelihood of an event occurring, identifying the degree and magnitude of risk, analyzing the environment, choosing a risk management strategy, choosing risk management techniques and methods necessary for this strategy. reduction (i.e. risk management techniques), the implementation of a targeted impact on the risk. These processes together constitute the stages of risk management organization.

The organization of risk management is a system of measures aimed at the rational combination of all its elements in a single technology of the risk management process.

The first step in the organization of risk management is to determine the purpose of the risk and the purpose of risky capital investments. The risk goal is the result to be achieved. They can be winnings, profits, income, etc. The purpose of risky investments of capital is to obtain maximum profit.

Any action associated with risk is always purposeful, since the absence of a purpose makes the decision associated with risk meaningless. The goals of risk and risky investments of the wicket must be clear, specific and commensurate with risk and capital.

The next important point in the organization of risk management is obtaining information about the environment, which is necessary to make a decision in favor of a particular action. Based on the analysis of such information and taking into account the goals of risk, it is possible to correctly determine the probability of an event, including an insured event, identify the degree of risk and evaluate its cost. Risk management means a correct understanding of the degree of risk that constantly threatens people, property, financial results of economic activity. It is important for a bank to know the true cost of risk to which its activities are exposed.

The cost of risk should be understood as the actual losses of the bank, the costs of reducing the magnitude of these losses or the costs of recovering such losses and their consequences. A correct assessment by a financial manager of the actual cost of risk allows him to objectively represent the amount of possible losses and outline ways to prevent or reduce them, and if it is impossible to prevent losses, ensure their compensation.

Based on the available information about the environment, probability, degree and magnitude of risk, various options for risky investment of capital are developed and their optimality is assessed by comparing the expected profit and the magnitude of the risk. This allows you to choose the right risk management strategy and techniques, as well as ways to reduce the degree of risk.

At this stage of the organization of risk management, the main role belongs to the financial manager, his psychological qualities.

When developing a program of action to reduce risk, it is necessary to take into account the psychological perception of risk decisions. Decision making under risk is a psychological process. Therefore, along with the mathematical validity of decisions, one should keep in mind the psychological characteristics of a person that manifest themselves when making and implementing risky decisions: aggressiveness, indecision, doubts, independence, extraversion, introversion, etc.

The same risky situation is perceived differently by different people. Therefore, the assessment of risk and the choice of financial solution largely depends on the person making the decision. Managers of a conservative type, who are not prone to innovation, who are not confident in their intuition and in their professionalism, who are not confident in the qualifications and professionalism of the performers, usually leave risk. their employees.

Extraversion is a property of a person, manifested in its focus on the surrounding people, events. It is expressed in a high level of sociability, a lively emotional response to external phenomena.

Introversion is the orientation of a person to the inner world of his own sensations, experiences, feelings and thoughts. An introverted personality is characterized by some stable features of behavior and relationships with others, reliance on internal norms, self-absorption. Judgments, assessments of introverts are distinguished by significant independence from external factors, reasonableness. Usually a person combines in a certain proportion the traits of extraversion and introversion.

An integral step in the organization of risk management is the organization of activities to implement the planned action program, i.e. determination of certain types of activities, volumes and sources of financing of these works, specific executors, deadlines, etc.

An important stage in the organization of risk management is the control over the implementation of the planned program, the analysis and evaluation of the results of the implementation of the selected option of a risk decision.

The organization of risk management involves the definition of a risk management body in a credit institution. The risk management body can be a financial manager, a risk manager or the appropriate management apparatus: the insurance operations sector, the venture capital investment sector, the risk capital investment department, etc. These sectors or departments are structural subdivisions of the financial service of the bank.

The risk capital investment department, in accordance with the charter of a credit institution, may perform the following functions:

l carrying out venture and portfolio investments, i.е. risk capital investments in accordance with the current legislation and the charter of the bank;

l development of a program of risky investment activities;

l collection, processing, analysis and storage of information about the environment;

l determination of the degree and cost of risks, strategies and methods of risk management;

l development of a program of risky decisions and organization of its implementation, including control and analysis of results;

l implementation of insurance activities, conclusion of insurance and reinsurance contracts, insurance and reinsurance operations, insurance settlements;

l development of conditions for insurance and reinsurance, establishment of tariff rates for insurance operations;

l performing the function of an accident commissioner, issuing guarantees under the guarantee of Russian and foreign insurance companies, indemnifying losses at their expense, instructing other persons to perform similar functions abroad;

l maintaining appropriate accounting, statistical and operational reporting on risky capital investments.

CHAPTER 2. ORGANIZATION OF RISK MANAGEMENT ON THE EXAMPLE OF A BANK

2.1 Characteristics of "Asia-Pacific Bank" (open joint stock company)

"Asia-Pacific Bank" (OJSC) has come a long way of its development from the regional office of "Prombank of the USSR" in 1922 to CJSC "Amurpromstroybank" in 1992. Due to the significant expansion of the geography of the bank's branch network in the Far East and Siberia, the development of new areas of activity, it was decided to rename the bank. In 2006, CJSC Amurpromstroybank was renamed into Asia-Pacific Bank (OJSC).

Providing affordable, reliable and high-quality banking services to the clients of the Asia-Pacific Bank (OJSC) (hereinafter referred to as ATB) based on modern technologies and a high corporate culture. Promoting the economic development of the Far East and Siberia, the development of client business and improving the welfare of the population. Ensuring an individual approach to the financial needs of each client, a businesslike, friendly and trusting atmosphere. Entering a qualitatively new level of customer service, maintaining the position of a modern competitive Bank, creating a sustainable corporate governance system.

The bank is:

l Member of the mandatory deposit insurance system (the Bank was included in the register of banks participating in the mandatory deposit insurance system on November 18, 2004 under number 204)

l Member of the international payment system Western Union

l Associated member of the International payment system VISA International

l Member of the Association of Regional Banks "Russia"

l Member of the Society for Worldwide Interbank Financial Telecommunications (S.W.I.F.T.)

At the moment, Asia-Pacific Bank (OJSC) occupies:

l 82nd place in terms of net assets, among regional banks (RBC. The rating is current as of 03.04.2007)

l First place in terms of authorized capital in the Amur Region.

l The share of funds raised by the Bank from individuals is 7.42% of the market share of the Amur Region

l The share of funds of legal entities attracted by the Bank on current accounts in the market of the Amur region is more than 7% (for all territories of presence 1.15% (including 0.6% in Buryatia and Primorsky Krai - 0.4% Khabarovsk Territory)

l Occupies 12% of the market share of consumer lending in the Amur Region (3.15% in the entire territory of presence)

l The Bank holds a 5% share of the lending market for legal entities in the Amur Region (0.6% throughout the territory of presence)

l The Bank ranks second in the implementation of payroll projects among credit institutions in the Amur Region. The volume of issue of plastic cards of the Bank is more than 20.5% of the market of the Amur Region

Asia-Pacific Bank (OJSC) is a universal commercial bank that meets the needs of various client groups in a wide range of high-quality banking services in the Far East and Siberia. ATB seeks to effectively invest the attracted funds of individuals and legal entities, acting in the interests of depositors, customers and shareholders.

To ensure the efficiency of its activities, ATB develops its business by optimally distributing proportions between the following main areas of activity:

l lending to private clients;

l lending to enterprises and organizations;

l carrying out operations on a commission basis.

The resource base for the development of priority areas of activity is formed from the following sources:

l deposits of private clients;

l funds of legal entities;

l other sources.

Active work with private and corporate clients, improvement of the Bank's traditional products and development of new services made it possible to achieve significant financial results in 2008, improve the efficiency of financial operations and significantly increase business volumes. In 2008, net assets more than doubled and amounted to about 9.8 billion rubles, while the increase in assets by more than 84.6% was due to the increase in the loan portfolio.

Growth in business volumes, along with effective cost management, enabled ATB to earn 399.9 million rubles in 2008, which is more than three times higher than in 2007. Net profit for the year amounted to 293.3 million rubles - an increase of more than four times.

The authorized capital of ATB was increased by 30 million rubles, share premium amounted to 405.2 million rubles.

The capital of ATB increased by 115% to 1,341.8 million rubles, which was due to both a significant amount of earned profit and an additional issue. The efficiency of operations carried out by ATB has increased: over the year, return on equity (ROE) increased from 16.5% to 33%, return on assets (ROA) from 1.47% to 4%.

In 2008, ATB continued to promote and further improve its product range, introduce new products and services, and improve the quality of customer service. ATB's presence in the money transfer market continued to grow. In the reporting year, more than 142.6 thousand customer orders were executed for the transfer of funds in rubles and foreign currency. The total amount of transfers amounted to more than 1.9 billion rubles.

In 2008, 3.6 billion rubles were transferred to ATB as wages, which is 19% higher than the same indicator of the previous year. The total number of contracts for the transfer of wages as of 01.01.2009 amounted to 649 units. The total number of employees receiving wages through the bank's structural subdivisions on the basis of contracts concluded by enterprises with ATB has reached 86.5 thousand people. In the Amur region, ATB is the second in terms of the number of services for payroll projects of enterprises in the region (after Sberbank).

The number of valid cards issued by ATB increased 1.4 times to 87,000 cards. Debit turnover on cards also increased by 1.2 times and exceeded 3.2 billion rubles.

The volume of currency exchange transactions with foreign currency in cash amounted to 82.3 million US dollars, which is 100% more than in the previous year. In the context of changing savings and investment priorities of the population, the growth in the volume of transactions was mainly due to the sale of foreign currency in cash: the bank bought USD 14 million from the population and sold USD 68.3 million.

In 2008, the Bank serviced clients' foreign trade operations in the amount of USD 298 million, which is 45% higher than in 2007. In 2008, the functions of currency control on export-import operations of clients were performed by 5 ATB branches, while in 2007 only 2 branches.

In 2008 operations with precious metals were further developed, their volume exceeded 524 kg in physical terms, which is almost 1.8 times higher than in 2007.

The Bank continued to optimize the settlement system in order to increase the speed and reliability of payments, to meet the growing interests of customers. The number of settlement transactions increased by 26.5%. As of January 1, 2009, ATB had Nostro correspondent accounts with 16 credit institutions, including 3 non-resident banks. 4 credit institutions have Loro accounts with the Bank.

Determining the prospects for its further development, ATB, first of all, takes into account the influence of internal and external factors that affect the development of the country and society as a whole, as well as the banking sector. The Bank seeks to develop its competitive advantages and considers them as a basis for further activities.

The intensification of competition in all segments of the banking market, the need to increase capitalization and increase the volume of business determine for ATB as a strategic goal the growth of its investment attractiveness by ensuring high business efficiency, incl. modernization of management and technological processes, expansion of the product line, expansion of the branch network.

In addition, ATB will focus its efforts on improving its information transparency, will develop and improve the corporate governance system. The development of the branch network and the expansion of the use of alternative distribution channels will be aimed not only at solving the problem of increasing the availability of the Bank's services, but also at solving the problem of improving the quality of customer service.

A necessary condition for solving the problems facing ATB in the field of business development will be a comprehensive modernization that will optimize the management system, increase the efficiency of the network, increase labor productivity and control costs.

In order to successfully achieve the strategic goal of the Bank in 2009, the foundations for the formation of a new platform should be laid, which will ensure the conditions for realizing the existing potential of the Bank and further forward movement.

The Bank will respond flexibly and in a timely manner to changes in the market, actively creating competitive advantages.

2.2 The main areas of concentration of the degree of risks associated with various banking operations specific to the "Asia-Pacific Bank" (OJSC)

"Asia-Pacific Bank" in 2008 pursued an economic policy aimed at minimizing the risks of banking operations.

The internal control system is organized in the Bank in accordance with the regulatory requirements of the Bank of Russia.

The bank exercises control over the functioning of the banking risk management system on the basis of methods for assessing the relevant risks (risk assessment table using established coefficients). Permissible values of indicators of credit and deposit operations, liquidity and profitability indicators have been established, the responsibility of the relevant structural divisions of the bank for identifying risks, carrying out procedures that allow identifying risks when conducting certain new and non-standard operations and establishing significant changes in the level and nature of accepted risks are provided.

In order to minimize the amount of credit risk, the bank conducts a credit policy, which includes: a preliminary analysis of the borrower's creditworthiness, i.e. the ability to repay the loan, checking the proper condition of the collateral, setting limits and conditions for lending, diversifying the loan portfolio, assessing the cost of loans issued, monitoring loans issued earlier. The Bank analyzes, as part of other indicators, the sectoral risk.

Large credit risk, as well as the maximum amount of risk per borrower, depends on the amount of equity (capital) of the bank. The amount of own funds (capital) as of January 01, 2009 amounted to 622,814 thousand rubles.

As of 01.01.2009, the bank's capital is adequate to the risks it takes. If the bank's capital growth trend continues, credit risks will be minimized.

In the reporting year, the indicator of dependence on the interbank market periodically exceeded the established limit norms due to the growth of loan debt on interbank loans associated with the need for additional resources (due to the expansion of the bank's branch network).

In order to minimize the deposit risk, the Bank's attracted funds portfolio is made up of various types of attraction instruments: customer funds on current accounts, corporate deposits, and household deposits. The most permanent types of resources are the deposits of the population, the stability of these resources is guaranteed by a large number of clients, a stable dynamics of attracted funds.

The actual indicators of the efficiency ratio of attracted funds (K 9), which characterizes the ratio of attracted funds and bank loans as of reporting dates throughout the year, were within the maximum value of the standard.

The indicator of the structure of borrowed funds (K 10), which reflects the state of demand liabilities and borrowed funds, generally did not exceed the statutory value (max 40%), but on certain reporting dates (3 cases) there was an excess of this indicator up to 9% in due to the growth of demand account balances.

Due to the limited amount of own funds and in order to avoid losses due to unfavorable changes in the exchange rates of foreign currencies and precious metals, the bank carefully controls the currency position and constantly assesses the currency risk on the positions opened by the credit institution in foreign currencies and precious metals.

The Bank uses the following methods for this purpose: forecasting rates and limiting the currency position.

Limiting the currency position limits the amount of risk associated with an unfavorable change in the exchange rate, which the bank assumes. Limits are defined both for each currency and for the aggregate position in all currencies. In order to limit the currency risk, the bank establishes and communicates to the branches the share distribution of sublimits of open currency positions (OCP). Depending on the general situation in the bank, sublimits are periodically adjusted. The currency risk assumed by the bank is minimized by actions in accordance with the requirements of the instructions of the Bank of Russia

Interest rate risk - the risk affects the bank's income, the economic value of assets, liabilities. An unfavorable change in interest rates is a potential change in the bank's financial position.

Future changes in interest rates can serve as a source of both additional costs and additional income for the bank. When measuring interest rate risk, both of these possibilities are taken into account. Interest rate risk management includes the management of both assets and liabilities of the bank. Asset management is limited, firstly, by liquidity requirements and the credit risk of the bank's asset portfolio and, secondly, by price competition from other banks, which limits the bank's freedom in choosing the loan price. Liability management is difficult, firstly, by the limited choice of debt instruments that a bank can successfully place among its depositors and other creditors at any time, and secondly, by price competition from other banks for available funds.

Minimization of legal risk is ensured by the development and use in the work of standard forms of contracts, by conducting legal examinations of concluded contracts before they are signed for their compliance with current legislation.

In order to reduce the level of operational risk, the bank regularly conducts checks for compliance with the procedure for conducting transactions and their proper reflection.

Internal control is aimed at limiting the risks assumed by the bank, at ensuring the procedure for conducting operations and transactions that contribute to the achievement of the bank's target performance targets, while complying with the requirements of the law and regulations of the Bank of Russia.

2.3 Management of the main risks associated with the activities of the Asia-Pacific Bank (OJSC)

The risk management system in place at the Bank is based on the regulatory requirements and recommendations of the Bank of Russia. ATB's risk management system is determined by the "Risk Management Regulation", the policy for managing individual banking risks (liquidity, credit, market, operational risks) is regulated by internal standards and procedures.

ATB last year improved all elements of risk management, including information systems, procedures and technologies, taking into account strategic objectives, changes in the external environment, innovations in the world practice of risk management, so at the end of 2008 a department was created independent of the departments opening risk positions, whose responsibilities include assessing the risk management system, identifying and analyzing potential and realized risks.

Credit risk is considered by the bank as one of the most significant types of risks inherent in banking activities. It can be considered in two directions: from the point of view of quantitative and qualitative assessment. This approach allows you to determine the place of credit risk both for each loan individually, and to calculate the total credit risk of the portfolio as a whole. Graphically, this can be represented as a risk map, along the vertical axis of which one can plot the quantitative reflection of risk, that is, the amount of loss that each loan individually bears, and along the horizontal axis, the probability of occurrence. This example is a simplified credit risk map model. Each point is a definition in two dimensions of the risk value for each loan individually. The aggregate value may reflect the credit risk of the portfolio as a whole.

The main way to reduce credit risk is the requirement of the bank to secure the loan, i.e. availability of guarantees or collateral. A mortgage on some movable or immovable property of the client or other assets can serve as collateral. By accepting good collateral, the bank has the right not to create a provision for possible losses on this loan.

Another way to reduce credit risk is to use credit scoring. The use of scoring systems is designed to help the bank create a consistent and logical base for making decisions by providing credit officers with a clearer, more intuitive measure of credit risk.

As a rule, models are developed on the basis of accumulated empirical data. The scoring model for individuals can be based on personal data of borrowers, expert knowledge of the bank's management, numerical assessments obtained from the statistics of "bad" and "good" loans, numerical assessments based on objective regional and industry information. As a result of the work of the model for evaluating a particular borrower, a credit portrait of a potential borrower is formed, which makes it possible to perform: the procedure for separating potential borrowers into “bad” ones who cannot be given a loan, and “good” ones who can be given a loan; calculation of individual parameters of a loan transaction for a particular borrower (limit, interest, term, loan repayment schedule); risk calculation and loan portfolio management for all loans to individuals.

Credit bureaus are the key link in building scoring models. Attempts to introduce this institution in our country have not yet been very successful. The development of the institution of credit bureaus is hampered by the reluctance of large banks to disclose information about their borrowers. Banks with a significant consumer lending client base set up their own credit bureaus. The reason is the so-called “free-rider problem”: small banks that do not have a large customer base will benefit from the introduction of a credit bureau, and they will receive information about customers at minimal cost. Of course, segment leaders do not like this, and they prefer not to cooperate in the exchange of information with their competitors. As a result, the market loses, as the overall losses from fraud increase, and the average rate on loans rises. The issue of confidentiality of information provided by banks to credit bureaus remains open. Until banks can vouch for their customers that this information will not fall into third hands.

The main objective of credit risk management while expanding the range of counterparties and the range of credit products provided by the Bank is to optimize the risks taken by optimizing the portfolio's product, industry, and regional structure.

Credit risk management was carried out in accordance with the Bank's Credit Policy, which provides for the implementation of a systematic approach based on the principles of risk awareness, delimitation of powers for risk assessment and acceptance, monitoring and control of accepted risks. Issues of identification, analysis, assessment, optimization, monitoring and control of credit risk are regulated by the Bank's regulatory documents.

In the reporting year, the total level of overdue debts to dishes amounted to 3.81% (in 2007 - 4.42%).

Unlike methods for assessing and minimizing credit and market risks, methods for managing operational risk have been developed relatively recently. In the 1988 Basel Accord, operational risk was considered a by-product of credit and market risk and was categorized as "other" in the family of risks. The Basel-2 Agreement considers operational risk separately, provides a definition, methods for its assessment, and the causes of its occurrence. The Basel Committee believes that operational risk is an important risk faced by banks and that banks need to hold a certain amount of capital against losses associated with it.

In developed markets, it is considered correct to centralize the risk management function, concentrating it in a single, dedicated unit for the bank as a whole. The target function in terms of operational risk management, namely minimizing the level of operational risk or the bank's losses from its implementation, obviously, should also be concentrated in this division and considered in the general context of the bank's risk management. However, it is a common practice in banks to assign responsibility for operational risk (or what a particular bank understands by operational risk) to IT departments. Approaches to assessing operational risks have been developing rapidly in recent years, but still lag behind in terms of accuracy from methods for measuring credit and market risks (even in "advanced" markets). Operational risk assessment involves assessing the likelihood of events or circumstances leading to operating losses and assessing the amount of potential losses.

Methods based on the use of statistical analysis of distributions of actual losses make it possible to make a forecast of potential operating losses based on the size of operating losses that have occurred in a given credit institution in the past. Statistical methods and models are actively used if the probability of occurrence of a particular type of operational risk is sufficiently high, and its occurrence is massive in the market. In this case, correlation models can be used, in which the function will be the probability of the occurrence of operational risk, and the variables will be factors that form operational risk (for example, the number of operations that directly determines the frequency of personnel errors).

The essence of the weight-point method is to assess operational risk in comparison with measures to minimize it. On the basis of expert analysis, indicators that are informative for the purposes of managing operational risk are selected and their relative importance (weight coefficients) is determined. Then the selected indicators are summarized in tables (scorecards) and evaluated using various scales. The results obtained are processed taking into account weight coefficients and compared in the context of the activities of the credit institution, certain types of banking operations and other transactions. The use of the weighted method (scorecard method) along with the assessment of operational risk makes it possible to identify weaknesses and strengths in operational risk management.

As part of the modeling method (scenario analysis), based on expert analysis for the lines of activity of a credit institution, certain types of banking operations and other transactions, possible scenarios for the occurrence of an event or circumstances leading to operating losses are determined, and a model for the distribution of the frequency of occurrence and size of losses is developed, which then used to assess operational risk.

Monitoring of losses from the onset of operational risk includes an analysis of each case, a description of the nature and reasons that led to the implementation of operational risk in a particular situation. In order to identify areas that are most susceptible to operational risk, it is recommended to conduct a step-by-step decomposition of processes and technologies into their elementary components (operational unit), for each of which the degree of influence of one or another risk source on it is determined empirically or statistically. The specified decomposition of operational risk objects into elementary operations is called the decomposition of operational risk by operations that make up the catalog of operational risks. The catalog allows you to identify the most vulnerable division of the bank. Compiling a catalog of operational risks is the main task in building an adequate system for managing this risk. It can be compiled either independently by the bank's divisions in the form of a so-called technological map of ongoing operations, or it can be entrusted to an external consulting firm. After compiling the catalog, those processes and individual operations are identified on which specific risk factors are most concentrated. Then measures are developed to reduce and limit the identified risks.

Operational risk management was carried out in accordance with the recommendations of the Bank of Russia on the organization of operational risk management, which is determined by the “Regulations on Operational Risk Management”. The Bank singles out the risk of business processes, information risk, risk of personnel, risk of illegal actions, risk of loss or damage to property, legal risk as the main operational risks subject to monitoring and control.

In order to monitor and control its operational risks, the work plan of the risk assessment department provides for the development of regulations for maintaining a register of risk events and the introduction of the practice of accounting for the latter.

Market risk management was carried out in accordance with the “Regulations on Market Risk Management”, which provides for the implementation of a systematic approach, delineation of powers to assess and accept risk.

Market risk includes: interest, stock, currency.

In order to limit the interest rate risk, the decision on placement (in terms of profitability) is made based on market conditions and other parameters (the current refinancing rate, the cost of attracted resources). The Financial Committee has been established in the Bank to manage interest rate risks.

The Bank is not exposed to equity risk, as it does not have investments in marketable securities.

The Bank is exposed to currency risk due to unfavorable changes in foreign exchange rates and prices for precious metals. As part of the system of limits and restrictions, the bank has limits on the total open position and limits on the open position in certain foreign currencies.

The level of currency risk in 2008 remained at an insignificant level. The share of the open currency position in net assets as of January 1, 2009 was 0.0012%.

The assessment, management and control of liquidity risk is carried out in the Bank, on the basis developed in accordance with the recommendations of the Bank of Russia "Regulations on the policy in the field of management and control over the state of liquidity". The Bank's liquidity is assessed at all terms. The liquidity level forecast is regularly reviewed by the Bank's Asset and Liability Management Committee. The analysis of short-term liquidity and monitoring of the Bank's cash flow is carried out on a daily basis. All these measures help maintain the Bank's financial stability while maintaining the quality of customer service.

The risk management system in place in the Bank allows it to comply with the main standards of the Bank of Russia with a margin.

	Name of indicator	Indicator value
	Capital adequacy ratio
	Instant liquidity ratio
	Current liquidity ratio
	Long-term liquidity ratio
	Maximum exposure per borrower or group of related borrowers
	Maximum size of large credit risks
	The ratio of the total value of loans and borrowings issued to insiders to capital

The Internal Control Service checks the Bank's internal control system and the effectiveness of the existing banking risk management procedures.

In general, in 2008, the Internal Control Service did not reveal any cases of taking on by the management of divisions or management bodies unacceptable risks for the Bank and situations where the control measures taken are inadequate to the level of risk, as well as violations, errors and shortcomings in the activities of individual divisions and the Bank as a whole that may pose a threat to the interests of creditors and depositors or affect the financial stability of the Bank.

credit risk management bank

CHAPTER 3. CREDIT RISK MANAGEMENT AS ONE OF THE INSTRUMENTS FOR CREDIT RISK MANAGEMENT

Credit risk management, based on the systemic organization of banking, is a nascent, in its infancy, direction of banking activity.

Commercial banks are integrating into the global banking community and fully feel the impact of the processes of globalization and internationalization of banking activities, the tightening of conditions for interbank competition, and the need to introduce advanced banking technologies. When organizing banking risk management, they are forced to take into account both their own domestic problems in the realities of economic life, and the problems of adaptation and creative assimilation of the latest banking business processes and products of Western credit risk management.

Efficient credit risk management is guaranteed by the evidence-based methodology of this process, based on well-defined principles.

The principles of credit risk management include:

1. Purposefulness implies the allocation of the main goal of the credit risk management system, its decomposition into a system of ordered subgoals and fixing the sequence of achieving these subgoals.

2. Integrity predetermines the boundaries of managerial intervention in credit risk management. Unskilled bank management can destroy the functioning of credit risk management.

3. Awareness of taking risks. Credit risk management should be carried out consciously with a certain tolerance for risks and understanding that the desire to extract additional profit can be fraught with a negative scenario for the realization of credit risks. Naturally, for individual transactions, after assessing the level of risk, it is possible to adopt a strategy of "risk avoidance", however, it is impossible to completely exclude risk from banking activities, since banking risk is an objective phenomenon inherent in most of the operations carried out.

4. Flexibility. This refers to the ability and inclination of credit risk management to change as a result of setting new tasks, changes in the risk, pricing, credit and other policies of the bank under the influence of external factors.

5. Reliability provides for the consistency of the actions of the elements of the credit risk management system, excluding the distortion of management orders.

6. Manageability. The structure of the loan portfolio may contain predominantly credit risks that can be neutralized in the process of credit risk management, regardless of their potential.

7. Efficiency implies such minimum time intervals from the adoption of a management decision to its execution, which would allow timely adjustment of the behavioral characteristics of open credit positions.

8. Optimality is characterized by high-quality credit risk management, which ensures rational links between the elements of the system at all levels.

9. Cost-effectiveness consists in ensuring the maximum effect from credit risk management with minimal costs for the maintenance of the administrative apparatus.

2.2. Bank risk management structure

Speaking about banking risk management, it is necessary first of all to find out what is meant by the term "management".

In economic theory, two main concepts of management prevail. The first considers management as a process, "a series of continuous interrelated actions" or management functions. Moreover, the list of functions that make up the content of the management process varies, including the following functions: planning, organization, management, motivation, leadership, regulation, coordination, stimulation, control, communication, analysis, evaluation, decision-making, recruitment, representation and negotiating, making deals. Note that most of the listed functions relate to enterprise management, and not to management in principle, that is, they cannot be automatically applied to any management object.

The second concept is based on a systematic approach. In the general case, control here is considered as the impact of the control subsystem (subject of control) on the controlled subsystem (control object). An example of this approach is the following interpretation “Management is a purposeful impact on the system in accordance with the laws operating inside and outside of it to ensure effective functioning.”

It should also be noted that modern management theories also pay special attention to the third - situational approach, emphasizing both the initial differences between individual systems and the temporal variability of the external and internal environment of a particular system.

Obviously, the systems approach characterizes management from the spatial and structural side, while the process and situational approaches focus on the spatio-temporal side of management. Combining these concepts, we can consider management as a constant purposeful influence of the subject on the object in the socio-economic system through a certain mechanism. The mechanism includes the purpose, principles, management functions and their corresponding methods and organizational forms.

Turning directly to risk management in banks, it is necessary to specify the object, subject and management mechanism, to emphasize the features of these elements, in contrast to other management systems.

Speaking about banking risks as an object of management, it is necessary to take into account the specifics of the risk category, which is manifested in the presence of a close causal relationship. It is impossible to consider the risk regardless of the factors that give rise to it, and the negative events that may appear as a result of its implementation. Moreover, summarizing the experience of managing banking risks, it can be noted that the control effect on risk is carried out in three directions: directly on risk as a probability, on risk factors and on its consequences.

Since probability exists objectively, under constant conditions its value remains unchanged. Consequently, the only control action possible in relation to risk directly as a probability, without affecting its factors and results, is its assessment. That is, risk exists only as a link between factors and results and is a kind of indicator of this relationship, which we can express numerically or verbally. And the regulation of the level of risk, in other words, the manipulation of its value, its reduction or avoidance, is achieved only through the elimination of its causes or mitigation of the consequences.

Banking risks are also characterized by ambiguous manageability. There are risks that can be fairly adequately assessed and maintained at a certain level, or, if necessary, measures can be taken to avoid them. These are risks representing a priori or statistical probability. Another type of risks is characterized by limited manageability or the impossibility of management, which in turn is subdivided into the impossibility of assessing or the impossibility of influencing the level of risk.

The a priori probability practically does not occur in reality. And in banking, there are no risks at all that would have clearly defined causes and consequences that are not influenced by random factors, and, therefore, an unambiguous assessment. However, most banking risks are of the nature of statistical probability (for example, credit, currency, interest, liquidity risk, etc. - almost all financial risks). The management of such risks is based on the application of economic and mathematical methods, while not excluding the opinions of experts. Some of the risks are difficult to manage. These include functional risks: operational and managerial. With regard to this type of risks, mainly methods of expert assessments are used, which are based on experience and intuition.

However, there is currently no clear division between managed and unmanaged risks. So, for example, it was traditionally believed that credit risks are fairly reliably assessed using mathematical formalization. Nevertheless, banks have recently been actively using the ratings of rating agencies, whose work is based on the opinion of experts. In turn, hard-to-manage operational risks are now successfully insured. In particular, large insurance institutions assume the entire package of criminal risks to which banks are exposed.

Speaking about banking risks as an object of management, it is also necessary to discuss such characteristics as acceptability. Not all risks are equal in terms of the magnitude of their consequences. From the point of view of riskology, adverse consequences should be divided into harm and fatal outcome. The harm is associated with the deterioration of the situation and it is advisable to attribute it to crisis situations, and the fatal outcome is associated with the annulment of the system, i.e., with its withdrawal from the life cycle, and it is advisable to attribute it to catastrophic situations. In relation to banks, the risk of catastrophic scale can be considered the risk of insolvency. All other risks are of a crisis nature and the results of their implementation, in turn, act as factors in relation to the global risk of insolvency.

However, acceptability can also be considered from the point of view of the subject. In this aspect, acceptability means the subject's preference for risk. The subject of banking risk management has a two-level structure with a hierarchical dependence: direct risk management, taking into account all functions, is carried out by commercial banks, the functions of regulation and control are also assigned to the Central Bank.

Commercial banks are by nature entrepreneurial structures, and their attitude to risk is dictated by the laws of the market. Risk management is carried out by them in order to maintain a balance between current profitability and sustainability, i.e. for long-term profitable operation. A commercial bank in risk management pursues only its own microeconomic goals. The positions of the bank's management in such conditions can be either conservative (taking on a minimum of risk) or aggressive (preferring higher risk in the hope of increased income), depending on which goal is fundamental - stability or profitability. Ideally, the parity of these goals should be maintained. Only then will the bank's activity be successful.

In market conditions, adherents of a polar conservative or aggressive risk policy are doomed to bankruptcy. However, given the special role of commercial banks as financial intermediaries, their activities should not be allowed to be regulated solely by the laws of the market. Massive bank failures can engulf the entire economy of the country in a chain reaction and lead to catastrophic consequences. From the point of view of macroeconomics, a bank cannot be aggressively risky, since it risks not so much its own as borrowed funds. Therefore, in all countries with market economies, supervisory authorities (central banks) actively regulate the risks of the banking sector, setting limits on risks and exercising control over their compliance by commercial banks. As you can see, the central bank and commercial banks use various elements of the management mechanism, the fundamental of which is the goal.

Let us consider in more detail the spatial-structural model of banking risk management presented in fig. 2.2.

Rice. 2.2. Spatial-structural model of banking risk management

It can be said that in the banking risk management system, management by a commercial bank has the character of a certain “basis”, since it is the specifics of the functioning of commercial banks in a market economy that necessitates such management. In turn, risk management from the standpoint of the central bank (hereinafter referred to as the Central Bank) acts as a “superstructure”, which, on the one hand, is auxiliary in relation to management in commercial banks, and on the other hand, is hierarchically higher.

In accordance with the purpose, the principles of risk management also differ. For commercial banks, the most important principles are to maintain the optimal amount of management in accordance with the size, age and nature of the bank's activities, while complying with the requirements of the Central Bank. Obviously, a newly created bank is not able to immediately build an effective risk management system, since it lacks the experience and information on previous activities necessary to build risk assessment and management models. In a small bank, the material and technical base is insufficient, and there is also no possibility of attracting qualified personnel for risk management. And in banks with a pronounced specialization of activity, there is no need to cover by management those risks that do not play a significant role in their work.

In other words, this is the principle of management efficiency, that is, the effect of management should be correlated with costs and opportunities. However, at the same time, any commercial bank is obliged to comply with the minimum requirements imposed by the central bank in relation to risks. In particular, all commercial banks in the Russian Federation must comply with economic regulations, as well as have an internal control system, including certain requirements for risk management.

Management by the Central Bank is aimed at implementing the following principles: firstly, it is efficiency, but already at the centralized level, i.e. the measures taken by the central bank should thus limit risks in order to minimize bankruptcies in the banking system. But at the same time, the Central Bank should not violate the independence of commercial banks as business structures, that is, its interference in the activities of banks should be minimal. In addition, we believe that the role of the Central Bank in terms of maintaining the stability of the banking system is not only and not so much in imposing restrictions and sanctions on “guilty” banks, but also in promoting effective management at the basic level. This means that the central bank should, firstly, promote the training and professional development of specialists involved in risk management in banks, and secondly, due to its privileged position, which implies access to statistical data throughout the country's banking system, regularly provide commercial banks with the analytical information they need to manage risk without compromising the privacy of individual banks.

As for management methods, from the side of the Central Bank they can be divided into methods of regulation and methods of control, which are reflected in such organizational forms as the establishment of economic norms and standards, prudential supervision, monitoring, accumulation and provision of information. In turn, risk management in commercial banks is implemented through assessment methods, regulation methods and risk compensation methods. Moreover, it is rather difficult to single out any general organizational forms of management here, since they are not regulated from above. Perhaps the only general organizational form in Russia is intrabank control, which is mandatory for all commercial banks.

And finally, the control technique is revealed in specific techniques, which are covered in detail in the relevant documents. At the centralized level, these are the Central Bank's regulations relating to supervision and regulation, as well as internal regulations for the collection and processing of information received in the form of reports from commercial banks. Accordingly, in commercial banks, the technique is described in intra-bank instructions and regulations.

Consider now the spatio-temporal model of banking risk management (Fig. 2.3). Recall that its essence lies in the constant continuous implementation of management functions. When it comes to such an object of management as risk, it is advisable to use the following list of functions: planning, organization, evaluation, regulation and control.

Rice. 2.3. Spatio-temporal model of banking risk management

The management process in a commercial bank includes the continuous implementation of all the listed functions. Planning can be divided into strategic and operational.

One of the most important planning tasks is the development of a risk limit policy. In addition, a special place is occupied by the initial construction of a risk management system. Planning at the initial stage of bank development is the starting point for the entire management process. At this stage, the situation is complicated by the fact that the bank's management does not have sufficient material and technical base and intellectual resources for decision-making. The main obstacle to effective management is the lack of internal information, and therefore risk management at the initial stage of bank development is based mainly on the intuition and subjective opinion of the bank's management and staff, the introduction of economic and mathematical models is very limited and does not reflect the specifics of a particular bank.

2.3. Organization of the risk management process in the bank

Proper organization is essential in risk management. At present, it is debatable whether the bank should have a separate division dealing with risk management, or whether it is more efficient to distribute powers in this area among various business units, the activity of which is actually exposed to certain risks. The accumulation of risk management within a special unit (risk management department, risk analysis and assessment department, etc.) is not always effective for a number of reasons: firstly, it is almost impossible to take into account the nuances of managing individual risks in the work of a limited number of specialists included in the staff similar department of the bank; secondly, this subdivision is often redundant, performing the functions of other departments, which leads to an increase in unproductive expenses; thirdly, due to the remote gap between such a unit and departments directly conducting risky operations, there is a possibility of opposition "on the ground". At the same time, the internal control service, created in each Russian bank in accordance with the Regulation of the Central Bank of the Russian Federation No. 242-P and called upon, along with other powers and responsibilities, to organize risk management, often performs only the functions of internal audit, and carries out work in the area of interest to us formally. This situation is explained by the fact that this service was introduced on a mandatory basis at the initiative of the Central Bank of the Russian Federation without taking into account the individual characteristics of individual banks (many of them already solved the problems of internal control on the basis of other departments, while others were not ready to organize an effective system in a short period of time). internal control). As a result, in a number of banks, the real purpose of this service is compliance with the requirements of the Central Bank, and not real control over the risks to which the bank is exposed.

We believe that the initiative to implement risk management methods should still come from below, from the bank's business units responsible for certain areas of activity. The specialists working in them are better aware of the relationship of specific factors with risk manifestations, faced with them in practice, than employees of an artificially introduced risk management unit. However, two problems may arise in this case: on the one hand, employees involved in decision-making in the field of risky operations may be aimed at obtaining maximum income while ignoring increased risks, and on the other hand, they may not have sufficient knowledge of the mathematical apparatus necessary in this area as an analysis tool. The solution to these problems can be found in the following way: the bank should develop a risk management strategy, and employees of business units should take an active part in its development. The strategy must necessarily be of a systematic nature, excluding any contradictions and ambiguities and pointing to specific rights and obligations and the procedure for interaction between individual units. Strategy approval should be at the senior management level. Tactics should become a real reflection of this strategy - specific limits and methods that must be applied and observed by the lower levels of the bank. In turn, economic modeling can be implemented by mathematicians on the basis of an analytical or software department in close relationship with departments directly involved in risky operations. Thus, it is necessary to maintain an effective balance of centralization and decentralization in banking risk management.

We also note the influence of the organization of all management in the bank on the construction of an effective risk management system in it. Currently, in many Russian banks, management is carried out within the framework of a linear functional structure, i.e., linear services directly involved in banking operations and services, and functional services (accounting, marketing, planning, analytical, personnel, etc.) .), which generally support and control all linear links. Management functions in such a structure are concentrated at the level of bank management. Apparently, this explains the position of those theorists and practitioners who put forward the thesis about the need for the existence of a separate functional unit dealing with risk management. However, as experts note, in countries with developed market economies in large firms, including banks, the divisional type of management structure prevails. In the divisional structure, part of the management functions are delegated to divisions - separate divisions of the bank. These can be branches, departments, or simply departments specializing in any type of banking operations. The divisions are fully self-supporting, that is, along with the ability to make autonomous decisions, they also receive responsibility for their implementation. If the division takes on increased risks and incurs losses, then it can be liquidated. The divisional structure essentially means a competitive environment within the bank.

Undoubtedly, it is rather difficult to quickly move from a linear structure to a divisional one, and any innovations coming from the West must be adapted to Russian reality. However, we are already seeing real steps towards such a restructuring of management. A typical example is the introduction in domestic commercial banks of such an institution as the treasury, the main tasks of which are to maintain the liquidity of the bank, the effective redistribution of resources and the determination of their intrabank price. The Treasury allows you to identify the performance of various departments, giving them the character of self-supporting business units, while with a linear functional structure, you can only evaluate the performance of the bank as a whole in all areas.

Using foreign experience and taking into account the realities of the Russian banking system, we will make an attempt to apply the advantages of a divisional structure in risk management. The organizational structure of banking risk management proposed by us is shown in Fig. 2.4.

Rice. 2.4. Organizational structure of the bank in terms of risk management

The role of the top management of the bank should be to solve strategic problems, in other words, the activities of the management should be aimed at avoiding such a global risk as the risk of bank insolvency. This is achieved by developing and approving limits and restrictions, within which lower divisions can make decisions and act on the risks they take on themselves, without posing a threat to the bank's capital. Treasury is central to balance sheet risk management. In connection with the performance of its main tasks, it automatically acts as a unit responsible for the operational management of liquidity risk and interest rate risk. In turn, the functions of assessing, regulating the level and partially controlling individual specific risks within the limits allowed for the whole bank are transferred to departments directly involved in banking operations and services. For example, the credit department promptly manages credit risks, the currency department - respectively, currency, the securities department - market risks, etc. Mathematical and software support for the introduction of new risk management methods is carried out by specialists in this field on the basis of the analytical department and the software department (information technologies). Note that the initiative to introduce new methods should come from business units, otherwise their implementation may be formal.

A special role is assigned to the internal control service, which, with such a management structure, will actually solve the tasks assigned to it by the Central Bank in relation to risks, namely: current management (assessment, level regulation and control) of functional risks (operational and managerial), as well as control of activities business units in relation to their compliance with strategic restrictions and limits. Thus, the correct organization allows you to rationally distribute the control function from the lower levels to the top management.

The most specific and voluminous in banking risk management are the functions of assessment and regulation (optimization), which will be discussed in more detail below.

As for the process of managing banking risks by the Central Bank, its components are exclusively the functions of regulation and control. Moreover, the Central Bank regulates risks by indirect methods. If commercial banks directly influence the actual level of risks in their activities by manipulating their value, influencing risk factors or their negative consequences, then the Central Bank only sets certain limits and restrictions, puts forward requirements that commercial banks must adhere to in their activities. In essence, the Central Bank limits the risk preferences of commercial banks, preventing them from acting too aggressively. In this situation, it is important that the requirements set by the Central Bank are reasonable and do not hinder the development of banking. Note that the regulatory function of the Central Bank would not have had the desired effect without the implementation of appropriate control, which is implemented in the supervision system.

conclusions

Banking is always associated with risks. Risks are diverse in composition, level of influence and causes of origin. The risk management process always begins with building a multi-level classification and identifying the most significant risks.

In the process of managing banking risks, the interests of two subjects collide: the central bank, whose task is the stability of the banking system, and commercial banks, which seek to maximize their profits. The Central Bank establishes certain boundaries within which commercial banks can fully exercise their economic independence.

In the organizational structure of the bank, elements that are directly related to risk management can be distinguished. Firstly, this is the internal control service, whose task is to control risks at all stages of banking operations. Secondly, the Treasury, which focuses on interest rate risk and liquidity risk. Also, all banks have an Assets and Liabilities Management Committee and a Credit Committee, which meet at regular intervals and make decisions related to interest rate and credit risks, respectively.

Questions for self-examination

What criteria can be used to classify banking risks?
What risk groups are banking risks?
What is the subject and object of banking risk management?
What does the risk management mechanism include?
What is the role of the central bank in bank risk management?
What bank services are designed to manage banking risks?
What role does the treasury play in the bank's risk management system?

Bibliography

Sinki J. Financial management in a commercial bank and in the financial services industry / Per. from English. – M.: Alpina Business Books, 2007. – 1018 p.
Management of the activities of a commercial bank (bank management) / Ed. O.I. Lavrushin. - M.: Jurist, 2003. - 688 p.
Kovalev P.P. Banking risk management. - M.: Finance and statistics, 2009. - 304 p.

annotation

Presentations

Title of the presentation	annotation

The purpose of studying this topic is to acquaint students with the essence, classification of risks and organization of the banking risk management process.

Main goals:

give an idea of the types of classifications of banking risks;

demonstrate the features of bank risk management;

reveal the main elements of the risk management system;

present the structure of the organization of the risk management process in the bank.

Topic No. 02. Risk management in a commercial bank 1

02.01.Classification of banking risks 1

02.02.Bank risk management structure 6

02.03.Organization of the risk management process in the bank 13

Self-test questions: 17

Bibliography: 17

Classification of banking risks

Banking risk is a set of risks inherent in a bank as a commercial enterprise.

Banking risk can be defined as the probability of bank losses due to uncertainty in its activities and in the external environment.

To understand the whole variety of banking risks, it is necessary to build their classification. Moreover, the classification may differ depending on the purpose of use and the depth of detail.

The simplest option for classifying banking risks is, in our opinion, the selection of various groups of features combined in a table that can be rebuilt according to the degree of significance of risks depending on the situation under consideration, as well as supplemented with new elements. The classification of banking risks is presented in Table 2.1.

Table 2.1.

Classification of banking risks

Selection sign	Classification groups
By time	retrospective risk; current risk; prospective risk
By degree (level)	low risk; moderate risk; full risk
By belonging to one of the groups of the system of relations in human activity	economic risk; political risk; legal risk; disaster risk
By area of origin	external risk; internal risk
According to the degree of constancy of action	systematic risk; unsystematic risk
Depending on the possible outcome	pure risk; speculative risk
Where possible insurance	insured risk; uninsurable risk
By degree of coverage	individual risk; cumulative risk
By the nature of banking operations	risk of active operations; the risk of passive operations; off-balance sheet risk
By type of operation	credit risk; interest rate risk; currency risk; investment risk; leasing risk; factoring risk, etc.
By type of bank customers	industrial enterprise; trading company; credit organisation; individuals, etc.

Consider a multi-level classification of banking risks, schematically depicted in Fig. 2.1.

The most general criterion for differentiation is the sphere of occurrence of risks, according to which risks are divided into:

Internal - risks associated with banking activities and the activities of bank customers (these risks come from the content of banking, while having both internal and external factors);

External - risks not directly related to the activities of the bank (they are formed purely in the external environment, their factors are numerous, and the consequences are unpredictable; external risks act as factors for internal ones).

In turn, internal risks are differentiated according to the sphere of influence into:

financial - risks associated with changes in the volume, structure, cost and profitability of the bank's claims and liabilities (they directly affect the bank's finances);

functional - risks associated with the organization of the bank's work (manifested, first of all, as failures of organizational processes, and then already transformed into losses or shortfall in profits).

Rice. 2.1. Multilevel classification of banking risks

Functional risks can ultimately be classified by risk factors into:

Operational - the probability of losses due to errors, abuses and fraud of bank personnel, as well as failures in the operation of equipment (their factors - human and technical - come from current activities, with the constant implementation of tasks);

Managerial - the probability of losses due to bank management errors (here the factors are in the wrong organization, setting goals and objectives).

Financial risks, as the most studied and manageable, have a more complex hierarchy. According to the nature of the influence, they are divided into:

Portfolio - risks affecting the volume, cost and profitability of the bank's claims or liabilities (i.e., they are unambiguously reflected either in the asset or in the balance sheet liability);

Structural - risks affecting the structure, cost and profitability of homogeneous claims and obligations (their factors are multidirectional depending on the structure of the balance sheet);

The risk of bank insolvency is the risk that the bank will have to use its own capital to repay liabilities (an integral risk, the factors of which are all other elementary risks, and affecting the very ability of the bank to function).

Portfolio risks, in turn, are divided by factors into:

Counterparty risks – financial risks associated with the activities of the bank's counterparties;

Market (price) risks are financial risks associated with changes in market conditions.

Counterparty risks by area of localization are divided into:

credit risk - the probability of bank losses due to non-repayment of the principal amount of the loan and interest on a loan or debt obligation (risk factors and the consequences of its implementation are reflected in the bank's loan and equivalent operations);

deposit risk - the probability of bank losses associated with the early withdrawal of attracted resources (in this case, the object is deposit operations).

If we consider market portfolio risks, then from the point of view of the area of localization they represent risks on securities - the probability of bank losses due to changes in the value and profitability of securities in the bank's portfolio (i.e. the ultimate risk object is the bank's stock operations and operations on other financial markets).

Structural risks in terms of factors include:

Liquidity risk is the probability of losses associated with the bank's difficulties in acquiring or selling assets in sufficient quantities in a short period and at an acceptable price.

Market (price) risks - financial risks associated with changes in market conditions (in this case, taking into account the multidirectional nature of their influence);

Structural market risks (by area of localization) include:

interest risk - the probability of bank losses due to changes in market interest rates (the object of risk is interest income and expenses).

currency risk - the probability of bank losses associated with changes in exchange rates (associated with the bank's foreign exchange operations).

Country risks - risks associated with investing in a particular country (i.e. factors are determined by country characteristics);

Force majeure risk - the probability of bank losses due to force majeure circumstances (it is very difficult to identify the factors, the risk is practically uncontrollable).

In turn, country risks can be differentiated into more specific areas:

economic - the probability of bank losses due to unforeseen changes in macroeconomic factors;

political - the probability of bank losses associated with adverse changes in policy;

legal - the probability of bank losses associated with inconsistency of the bank's internal provisions with the law.

This article discusses the basic concepts (risk management) and establishes the parameters that banks should try to achieve in their work.

For bank risk- this is the potential for shortfall in income or a decrease in market value due to the adverse effects of external or internal factors. Such losses may be direct (loss of income or capital) or indirect (imposition of restrictions on the ability to achieve one's business goals). These restrictions constrain the Bank's ability to carry out its current operations or take advantage of opportunities to expand its business.

Risk management is a risk management system that includes a strategy and management tactics aimed at achieving the main business goals of the bank. Effective risk management includes:

control system;
identification and measurement system;
tracking system (monitoring and control).

The concept of risk management (risk management)

Management of risks is a process by which a bank identifies (identifies), evaluates their value, monitors them and controls its risk positions, and also takes into account the relationship between different categories (types) of risks. The set of risk management actions aims to achieve the following goals:

risks must be understandable and understood by the bank and its management;
risks must be within tolerance levels established by the bank's supervisory board;
decisions on risk acceptance should be consistent with the strategic objective of the bank's activities;
risk-taking decisions should be specific and clear;
the expected return must compensate for the risk taken;
the distribution of capital should correspond to the size of the risks to which the bank is exposed;
incentives to achieve high performance should be consistent with the level of risk tolerance.

From the point of view of risk management, it boils down to accepting risk and receiving appropriate compensation (economic benefits) for this.

The purpose of risk management— contribute to the increase in the value of the bank's equity capital, while ensuring the achievement of the goals of many stakeholders, namely:

clients and contractors;
leaders;
employees;
supervisory board and shareholders (owners);
bodies;
rating agencies, investors and creditors;
other parties.

The concept of the complexity of the risk management system

Risk Management Process must:

cover all activities of the bank that affect the parameters of its risks;
be a continuous process of analyzing the situation and environment in which risks arise;
contribute to the adoption of managerial decisions regarding the impact on the risks themselves and / or on the level of vulnerability (exposure) of the bank to such risks.

Risk management decisions may include, in particular, risk avoidance: refusal to accept it; its minimization, including due to mitigating factors and / or transfer (transfer) of risk to other persons (through derivative instruments or), setting limits on the exposure of the bank and other methods of influencing the risk (risk carrier) or the level of the bank's vulnerability to it.

Risk management should take place at the level of the organization where the risk occurs, as well as through independent risk review and control functions at the highest levels of management and at the level of the supervisory board.

Banks should try to create a comprehensive risk management system that will ensure a reliable process detection, evaluation, control and monitoring all types of risk at all levels of the organization, including taking into account the mutual influence of various categories of risks, and would also contribute to resolving the issue of conflict of tasks between the need to generate income and minimize risks (see).

When developing and implementing a comprehensive risk management system for a bank, the supervisory board and the board must ensure the following:

introduction of an organizational structure and adequate control mechanisms;
taking risks in accordance with the expectations of shareholders (owners) of the bank, the strategic plan of the bank and regulatory requirements;
distribution in the bank of a common understanding of its corporate culture on risk management;
allocating the necessary resources to create and maintain an effective, comprehensive and balanced risk management system;
reflection in a systematic documentary form of the organizational structure and control mechanisms, appropriate access to these documents for participants in the risk management process in the bank;
coordination of the organizational structure and business process control systems of the bank with the corresponding systems of subsidiaries and other controlled organizations in such a way as not to harm the controlled and stable activities of the bank itself;
avoiding conflicts of interest at all levels of the bank;
carrying out a risk analysis taking into account the possibility of extreme circumstances (stress scenarios), on the basis of which the bank must determine the appropriate emergency measures, for example, in the form of a crisis action plan (see);
implementation of procedures and measures to prevent stressful situations that may arise due to certain internal factors;
development of procedures and measures for monitoring the adequate capitalization of the bank;
a clear formulation of the policy (normative document) of the bank to control risks and conduct business in accordance with reliability criteria;
systematic risk analysis to identify, evaluate, control and monitor all risks;
development and implementation of internal controls that would ensure proper compliance with the requirements of legislation and regulations, fulfillment of contractual and other obligations, compliance with regulations and procedures, rules and regulations, as well as appropriate business conduct;
creation of an independent risk management unit, which must have the appropriate authority, resources, experience and corporate status, so as not to have any obstacles in accessing the necessary information, in the formation and provision of management reports based on the results of their research;
creation of a service independent of the operating divisions of the bank and separated from the processes of the current one, which are part of certain components of certain business processes. The scope of interests of the internal audit service should cover all types of activities and all divisions of the bank.

General approaches to risk minimization and optimization

According to whether there is a relationship between risks and returns, risks can be divided into two groups:

quantifiable risks (). For example, ;
risks that cannot be quantified (non-financial risks). For example, .

Risks for which there is a relationship between risks and returns are considered as quantifiable, the management of these risks is to optimize them. Risks for which there is no relationship between risk and income cannot be quantified and their management is reduced to their minimization.

The risk management process is generally not intended to eliminate risk, but to ensure that the bank receives an appropriate reward for accepting the risk. The exception is some risks for which there is no relationship between their level and the amount of the bank's remuneration (for example, legal risk, reputational risk, ).

Many of the risks to which a bank is exposed are intrinsically banking and stem from the intermediary function of reallocating funds that banks perform (for example, credit risk). For such risks, the bank seeks to optimize the ratio between risk and return, maximizing the return for a given level of risk or minimizing the risk that must be taken to ensure the desired level of return. Thus, two quantifiable approaches to risk management emerge.

Some risks are often the price that must be paid for the right to engage in a certain business, such as legal risk. As a rule, the bank seeks or is forced to reduce such risks to a certain limit level, while trying to incur minimal costs. In this case, an approach to minimizing risks that cannot be quantified is manifested.

Sources and mechanisms of risk control

Bank activity risks arise on the basis of both internal (endogenous) and external (exogenous) factors. A significant part of external factors is beyond the control of the bank and the bank cannot be completely sure about the results of future events that may affect the bank and the timing of their occurrence.

The main factors that affect the level of external risks are political and related economic ones. All other factors (demographic, social, geographical) are viewed through the prism of political and economic factors.

Among the large number of external risks, five main groups can be distinguished:

force majeure risk— associated with the occurrence of unforeseen circumstances that adversely affect the activities of the bank and / or its partners (natural disasters, etc.);
- is associated with the possibility of unfavorable conditions for the bank's activities in the political, legal, economic sphere of the country in which the bank operates;
- due to changes in international relations, as well as the political situation in one of the countries that affect the activities of the bank or its partners (wars, international scandals, impeachment of the head of state, closure of borders);
legal risk- associated with changes in the legislation of different countries;
macroeconomic risk- arises due to unfavorable changes in the situation in individual markets or the entire economic situation as a whole (). Separately, it is necessary to single out a component of macroeconomic risk - inflationary risk associated with a possible loss of the initial value of assets.

The implementation of an external risk factor to which the bank is exposed may jeopardize the continuity of its activities. Therefore, in the process of risk analysis, the bank must necessarily take into account the possibility of extreme circumstances (stress scenario). Thus, the bank should develop appropriate immediate measures in the form of a crisis action plan, which is subject to regular updating and testing. Such action plans are an integral part of the bank's risk control mechanisms.

The bank must also ensure that procedures and measures are in place to prevent stressful situations caused by internal causes. The Bank should monitor risks to ensure a reasonable and reliable relationship between the general parameters of its risks and capital, financial resources and financial results (revenues) through appropriate control mechanisms.

Methods for quantitative risk assessment should be based on the criterion of the economic cost of capital and the need to maintain capital at a level that is necessary to offset the risks.

Approaches to the distribution of risk management functions

The bank should provide a clear distribution of functions, responsibilities and authorities of risk management, as well as a clear scheme of responsibility in accordance with such distribution.

The distribution of functions and powers should cover all organizational levels and divisions of the bank. Great importance is attached to the distribution of risk management functions between the supervisory board and the board of the bank. The general risk management strategy in the bank is determined by the supervisory board, and the general management of risk management is carried out by the board.

It is also necessary to pay due attention to the distribution of functions and powers of risk management between operational () and control services (audit), especially when it comes to ensuring the proper performance of internal control functions.

The distribution of responsibilities and subordination of departments should be documented and brought to the attention of the performers in such a way that all bank personnel understand their functions, duties and powers, their role in the organization and control process, as well as their accountability.

In world practice, there are four interrelated stages of risk management:

risk identification (revealing);
quantitative and qualitative assessment (measurement) of risk;
risk control;
risk monitoring.

Risk assessment should be carried out and/or confirmed by an independent service - a risk management unit that has the resources, authority and experience sufficient to assess risks, test the effectiveness of risk management measures and provide recommendations for the implementation of appropriate corrective actions.

In addition, other bodies and departments of the bank are involved in the risk management process within their functions and powers in accordance with the principles of corporate governance.

Concept of losses in terms of risks

Regardless of the sophistication and complexity of their operations, banks must distinguish between expected and unexpected losses.

Expected Losses are losses that the bank's management knows or should know that they may occur (for example, the expected percentage of losses on a credit card portfolio). Usually such losses in one form or another provide for the creation of reserves.

Unexpected losses are losses associated with unforeseen events (for example, a systemic crisis, etc.). The “buffer” for absorbing unforeseen losses is the capital of the bank.

Risk Analysis

The Bank shall ensure systematic risk analysis aimed at identifying and assessing their magnitude. The purpose of the analysis should be to understand the nature of the risks to which the bank is exposed and to determine whether they are consistent with its objectives, strategy and policies. Therefore, such an analysis should be carried out constantly both at the level of the institution as a whole and at the level of individual units and include the identification, measurement and evaluation of all types of risks, including the relationship and mutual influence between different categories of risks.

The risk analysis should cover all products, services and processes of the bank and include both a qualitative assessment of the relevant risks and an assessment of their quantitative parameters (if possible). Bank management should be aware of the results of the risk analysis and take them into account in their work.

Risk analysis is an ongoing process that should take into account:

changes in internal and external conditions of activity;
new products, services, processes;
future plans.

As a result of the risk analysis, it can be concluded that the risks of the bank do not correspond or no longer correspond to the selected parameters, or that the selected risk parameters do not correspond or no longer correspond to the tasks and strategy of the bank. It may also be that the bank's organizational structure and controls are not consistent with changes in the risk profile. Therefore, risk management should be accompanied by a review of the objectives, the chosen strategy, the developed organizational structure and control mechanisms.

Risk analysis may reveal risks that were not previously identified and/or that cannot be mitigated by appropriate procedures and controls. In such a case, the bank must decide on the acceptability of such risks and the advisability of continuing to carry out the type of activity on which these risks are based.

To ensure proper identification, understanding and management of risks in their interaction with each other, they should not be considered separately from each other. The analysis required to identify and summarize risks should be carried out at a level that allows coverage of the bank as a whole, both on an individual and consolidated basis.

The Bank must ensure that conflicts of interest are avoided. Risk analysis should be carried out and its results communicated to stakeholders without any influence from the bank's management responsible for a particular type of activity.

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Selection sign	Classification groups
By time	retrospective risk; current risk; prospective risk
By degree (level)	low risk; moderate risk; full risk
By belonging to one of the groups of the system of relations in human activity	economic risk; political risk; legal risk; disaster risk
By area of origin	external risk; internal risk
According to the degree of persistence	systematic risk; unsystematic risk
Depending on the possible outcome	pure risk; speculative risk
Where possible insurance	insured risk; uninsurable risk
By degree of coverage	individual risk; total risk
By the nature of banking operations	risk of active operations; the risk of passive operations; off-balance sheet risk
By type of operations	credit risk; interest rate risk; currency risk; investment risk; leasing risk; factoring risk, etc.
By type of bank customers	industrial enterprise; trading company; credit organisation; individuals, etc.

Risk management in the banking sector. Bank risk management

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Risk management is a system for managing risk and economic, more precisely, financial relations that arise in the process of this management.

l functions of the control object;

l functions of the subject of management.

The functions of the control object in risk management include the organization:

l risk resolution;

l risky investments of capital;

l work to reduce the magnitude of the risk;

l risk insurance process;

l economic relations and connections between the subjects of the economic process.

The functions of the subject of management in risk management include:

l forecasting;

l organization;

l regulation;

l coordination;

l stimulation;

l control.

Regulation in risk management, it is an impact on the control object, through which the state of stability of this object is achieved in the event of a deviation from the specified parameters. Regulation covers mainly current measures to eliminate the deviations that have arisen.

Incentive in risk management is the motivation of financial managers and other professionals to be interested in the result of their work.

The organization of risk management is a system of measures aimed at the rational combination of all its elements in a single technology of the risk management process.

Extraversion is a property of a person, manifested in its focus on the surrounding people, events. It is expressed in a high level of sociability, a lively emotional response to external phenomena.

l carrying out venture and portfolio investments, i.е. risk capital investments in accordance with the current legislation and the charter of the bank;

l development of a program of risky investment activities;

l collection, processing, analysis and storage of information about the environment;

l determination of the degree and cost of risks, strategies and methods of risk management;

l development of a program of risky decisions and organization of its implementation, including control and analysis of results;

l implementation of insurance activities, conclusion of insurance and reinsurance contracts, insurance and reinsurance operations, insurance settlements;

l development of conditions for insurance and reinsurance, establishment of tariff rates for insurance operations;

l performing the function of an accident commissioner, issuing guarantees under the guarantee of Russian and foreign insurance companies, indemnifying losses at their expense, instructing other persons to perform similar functions abroad;

l maintaining appropriate accounting, statistical and operational reporting on risky capital investments.

Similar Documents

2.2. Bank risk management structure

2.3. Organization of the risk management process in the bank

conclusions

Questions for self-examination

Bibliography

Presentations

Classification of banking risks

The concept of risk management (risk management)

The concept of the complexity of the risk management system

General approaches to risk minimization and optimization

Sources and mechanisms of risk control

Approaches to the distribution of risk management functions

Concept of losses in terms of risks

Risk Analysis