Study of Risk Management

INTRODUCTION

The project contains an analysis of Risk Management techniques adopted by the management of Bank of Baroda. We have studied the various risks that they encounter in their operations and the ways in which these risks are managed at different levels and measures taken by the management at different operational levels. The study also gives a general idea of the three steps of identification, quantification and mitigation of risks. Thus, this research project is a study of risk management in Indian Banks in general and Bank of Baroda in particular.

Risk is the uncertainty and uncertainty is inherent in every business and more so in Banking. Risk is defined as the probability of any unexpected happening and as a result thereof, the probability of suffering a loss. Banks, in the process of inter mediation are confronted with various kinds of financial and non-financial risks i.e., Credit Risk, Market Risk, (which include interest rate risk, Foreign exchange rate risk, Liquidity risk, equity price risk, commodity price risk etc.) and Operational Risk etc. Risks are as old as banks themselves. The business of Banking is thus, business of Risk Management.

Banks therefore, need to attach considerable importance to improve the ability to identify, measure, monitor and control the over-all level of risk in a scientific manner. The process of addressing all material risks in a structured manner by upgrading skills and adopting comprehensive practices is termed as "Risk Management". Risk Management does not aim at risk elimination but at bringing the level of risk to acceptable proportions without reducing their income.

SCOPE OF THE STUDY

This study starts with an understanding of the various types of risks faced by modern banks, the techniques and the framework related to Risk Management. Thereafter the adequacy of these measures is discussed. The