1. Banking Services & Financial services
2. Risk management in Banking and financial
3. Perspective on Risk Management in Banking and Financial Services
3.2 Widen and extended regulation
3.3 Fintech changes increases customer expectation
3.4 Advanced analytics and Risk Management Techniques
3.5 New risks are emerging
3.6 Purposefully remove biases from bank
3.7 Continuous pressure for cost savings
Banking Services & Financial services
All the actions involved in accommodating and protecting money owned by other individuals and entities and then lending out this money in order to earn a revenue is called banking services. And therefore banking service is said to be an end-to-end process guarantee the overall implementation of a financial service. Whereas, the financial services sector includes investments, insurance, redistribution of risk, and other financial activities to earn income through fees and commissions.
Risk management in Banking and financial
Risk management in banking is supposedly defined as the reasonable growth and implementation of a plan to deal with potential losses and protect the value of its assets. Financial risk management is the practice of protecting economic value in a firm by using financial instruments to manage exposure to risk. In this process of managing the financial resources including accounting, financial reporting, budgeting, collecting receivables, risk management, and insurance for a bank. Financial risk management allows employees to guide a company when difficult situations arise in the financial market. It helps enterprises generate approach to avoid losses and maximize profits as much as possible. Evaluating risk is essential for determining how worthwhile a specific investment is and the best process to diminish risk.
Perspective on Risk Management in Banking and Financial Services
The worldwide financial crisis highlights the importance of solid and widespread risk domination. The risk impact on capital allocation and value should be clearer to Board members and senior executives of banks. The Risk Management in banking and financial program present a general idea of risk governance and long term value creation in light of digital disruption and new regulations, final Basel III (Basel IV) and special resolution regimes with bail-in debt. Senior bank executives and board members concerned with risk governance must need to have better understanding of risk control. In the past decade, banks have made remarkable changes to risk management. The six proposal ideas to assist them stay ahead are stated below.
Widen and extended regulation
Although the amount and speed of regulatory change is improbable to be uniform across countries, the future unquestionably holds more regulation both for financial and nonfinancial banks and even for banks operating in emerging economies. Governments are also demanding that their banks comply with national regulatory standards wherever they operate in the world. Banks operating abroad must already adhere to US regulations concerning bribery, fraud, and tax collection. Governments are put forth regulatory pressure in other forms, too. Increasingly, banks are being required to assist in stopping on illegal and unethical financial transactions by detecting signs of money laundering, permit busting, fraud, and the financing of violence, and to facilitate the collection of taxes.
Fintech changes increases customer expectation
Financial technology companies or FinTech want to take over the direct customer relationship and hit the most rewarding part of the value chain which results almost 60 percent of banks’ profits by 2014. They also earned banks an attractive 22 percent return on equity, much higher than the gains they received from the provision of balance sheet and fulfillment, which generated a 6 percent return on equity. The picture perfect and simple apps and online services offered by fintechs are beginning to break banks heavy mutual attraction on customers. And protect consumers from unsuitable pricing and approval decisions.
Advanced analytics and Risk Management Techniques
Technological innovations continuously come out with new risk-management techniques and help to function risk make better with low cost decision.
- Big data which are structured and unstructured customer information are replaced with faster, cheaper computing power also help them to make better credit risk decisions, monitor portfolios for early evidence of problems, notice financial offense, and forecast outfitted losses.
- Machine learning method recover the exactness of risk form by identifying complex, variable patterns in large data sets.
- Crowdsourcing which make many sitting companies use to improve their efficiency.
New risks are emerging
Anyway using new technology will create the next pathway to detect and manage new and unfamiliar risks over the next decade
- Model risk. Banks growing hope is towards business modeling which need risk managers to understand and manage model risk better. Risk improvement will bring about precise plan and process for developing and validating models, along with stable monitoring and improvement of them
- Cybersecurity risk. Most banks have already made top protection against cyber but it only increase in significance and need ever better possessions.
- Contagion risk. Banks are more helpless to financial contamination in a global market. Negative market developments can quickly spread to other parts of a bank, other markets, and other involved parties.
Purposefully remove biases from bank
Biases are extremely appropriate for bank risk-management functions, because taking risk is the business of banks, and every risk decision is subject to biases. The risk function could take the lead in de-biasing banks.
- Commentator is another bias, where people tend to rely heavily on the first piece of information they examine when figure out opinions or making decisions.
- Business is a horizontal bias where business cases are approximately overstated.
Some energy utilities are trying to eliminate bias by redesigning the processes they follow in making major investment decisions. Such as involvement of most important academics and practitioners enclosed developed techniques for overcoming such biases also various industries started applying them.
Continuous pressure for cost savings
The downward pressure on margins is not because of the emergence of low-cost business models used by digital attackers. But constant margin decline in most geographies and product categories. As a result, the operating costs of banks will probably need to be substantially lower than they are today