Review On Risk Management Of An Organization Finance Essay - Free Essay Example

The credit risk management is analyzed by the authentic documents/legal documentation of the banks or any organization as it deals with the sensitive issues of any bank or organization The legal documentation of the bank includes the term papers for different purpose utilized by the bank for the instance, the bank provide different products or we can say financial products. These legal documents include Financial statements Profit loss statements Quarterly Reports Equability share Reports Investment Reports. Dividends Reports The data analysis factors are very much important in understanding the credit risk and credit management of any organization in short/long term planning. The credit risk management is done by the different things. Is is done by the customer satisfaction which is don by the review of different factors created by the credit risk. The utility of the credit risk management is usually the settlement of the causes of failures that can be caused by the credit risks. The credit risk management has a very vast area under its cover. It involve the factors which are created by the customers needs and can be overcome by doing the customer satisfaction management. The credit receiving is often taken to grant which help to put in plain words the needs of diplomacy. The first point of the credit control which should be kept in mind is to recognize the cost of credit and its various effects on the profit loss of the organization. By analyzing the credit risk we can conclude the banking risk that can be faced by the organization at various level of credit control process. Credit risk management is also very useful analyzing lacks that c an occur during the credit control policy of any origination The Objective of Study The key purpose of getting through this issue is to understand and analyze that how a bank or an organization can get itself out of the credit risks issue by applying the credit risk management inside and outside the organization A bank or an organization can overcome the credit risks that can cause serious credit damages to its credit policy by having a proper look at the following analyzing and understanding the present situation of the surrounding that can cause the credit risks to the organization adopting the favorable method to overcome the credit risks that are analyzed by the organization in the present situation Building a strong relationship between the different conceptual methods adopted to overcome the credit risks of the organization. creating an environment and a effective method to overcome the credit risks at the earliest Analyzing the range of damage that a credit risk can cause to the organization and then setting the priorities in this regards to wash out the credit risk of the organization. The Research Methodology The methodology is all about the techniques and explaining the various kind of tools that can be utilized to overcome or lessen the effects of the credit risks that causes the credit damage to the organization during its implementation of the credit risk management policy. In short we can say it is the way that describes the way-out from the credit risks of the organization or a banking sector. It can be done by taking in account the following: The risk management methodology is all about differentiating the function or system. The basic is tackle hazards faced by the organizations work or business function overcome by providing the valid and handing techniques This is inevitable for clearing the organizations task understanding and system operations and it works out with the limitations of IT assets and information concerned to it which contain the business / techniques useful for the system the complete and valid Information infrastructure the understanding of s ystem or application data compassion the actual picture of the Data Flow(s) Interfaces to exterior systems The useful System hardware software for the banking business The Processes done by the system to achieve the aims and goals of the organization to overcome the credit risks The practical Users of the system Valid system policies to run the system Authentic system security and the information necessities of the system The Content deals with the following: h approach to the overall risks in front of the organization. big risks and uncertainties various projects of an organization may have organization may have some physical assets greater depth than high level assessment by senior company executives Indispensable Requirements A commercial risk strategy Signed off by the Managing director or Chief Executive On paper policy of an organization Consistent high level support MODULES OF RISK Variability The effects of various unforeseen events that included in estimated project costs Uncertainty Be clear in acknowledging the banking models variations in projected project costs Constraints might involve The overall Organizational culture human factors The method adopted by the organization related to the Communications The Information involves in the process might be partial or non existent Assessment may not be conceptualized Information might be approximated in the short and long term The different Surprises faced at different times Areas of Uncertainty In launching of the fresh projects Validating Operating plants/facilities Defining Uncertainty in short and long terms If project uncertainty has not be defined then on a project basis we can use: Project novelty approach Design status approach Can use for both capital and operational uncertainty Quantitative evaluation Define level of aggregation desegregation Will be at a higher level than for a detailed project uncertainty analysis Use Monte Carlo calculation Here we can discuss some points that are the subject to the project management which are useful for overcoming into the context of the business organization in short and long run having all the possibilities taken under the considerations If we go along planning something we must look in doing something, searching something and creating steps to sort out our planning by having proper planning which we called the proper management if done for credit risk management the banking organizatio ns must be evaluated properly. The following questions should be taken under consideration What we are planning to do in managing the risk management? What is our approach in doing it? When is the right time to do the start? What are the prerequisites of doing? What time period will it require? What will be the cost require to complete it? These questions are usually asked at initiating of each project and answers are the structures on which the whole project stands clarifying what we need to do and what we want to achieve in short term planning and long term planning. Structured project management means to handle the project in logical well defined and applicable method adopted These questions are actually the prerequisite for almost every project to initiate and directed towards the right direction supported by the right equipments and methods adopted in such a way that the project goes the right direction towards goal achieving. Hypothesis Testing. Research Design: The risk management is done by the bank for achieving the following main objectives. To increase the income or profit of the bank To reduce the losses of the banks The above mentioned objectives are basic and vital for every bank in the world and we can say that almost every bank is created to do the above mentioned things. For achieving these the following hypothesis are done mainly stuffy the following Hypothesis: Mostly the banks have high range of profit and lower percentage of losses as far as the loans are concerned that are issued by the banks The banks which have higher percentage of income will obviously have the lower bad loans The following equation represents what we said in the above two points P (ROA, ROE) = ÃÆ'Ã… ½Ãƒâ€šÃ‚ ± + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²NPL/TL+ µ Where as NPL= non performing Loans TL= the total laon P= profitability ÃÆ'Ã… ½Ãƒâ€šÃ‚ ± = intercept ÃÆ'Ã… ½Ãƒâ€šÃ‚ ² = parameter explaining ROA ROE  µ = disturbance Data description The data is utilized that is provided by the concern banks in this regard. The time series analysis of the five year financial plan is very effective to figure out the exact picture of the present state of the risks that are faced and that can be faced by the organization or a bank The credit risk is taken under the consideration for each and every documentation of the banks/organization. Financial Reports. There are many ways to understand the banking ability and position. The financial reports are of main corkin which are made after analysis of the financial reports by the banks. Types of Financial Reports. There are many types of financial reports two of which are of mains converse 1. Yearly Financial Reports. The yearly financial reports include. The complete profit/loss of the organization financial statements are also included in the report The complete profit/Loss report is created at the end of the fiscal year which covers in the yearly financial report. 2. Quarterly Financial Reports The quarterly financial reports are done to have a quick view on the performance of the organizations or the bank. 3. Half Quarterly Reports The half quarterly report is created to have a quick and focused view on some certain products and products appreciation of the bank or any organizations. The Bank offers loans and launches different products which involves in the credit risk. The loans are the major concern which are very much involved in the credit risk. The recovery of the loans must be ensured by getting the proper security to avoid any risks caused by the loss due to loan non-recovery. The credit risk in the market is very much open. Launching more and more new products the possibility of the more and more credit risk can be faced by the organization or the bank. To avoid such risk the proper risk management should done to avoid the risks in these circumstances. CONCLUSION AND SUGGESTIONS Conclusion: In the last we can say that the banks make into use the various tools and techniques to overcome the credit risk and almost all the banks in the world occupy the common objective of having greater profit and lesser losses in the financing. They do usually long term planning in this regard SUGGESTIONS: However the banks are very well organized and proper functioning organizations but the following suggestions must taken in account to figure out the risk and are the elements of the risk management Applying the proper portfolio of planning and managing the organization in the long term policies. Developing the foundation for credit sanction policy Making the up-to-date payment informations available to the clients and banking authorities by adopting the effective software and tools