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❶Some of the banks have decided to conduct research so as to come with a way that the benefits of risk management can be measured and compared with the costs incurred; this will give the organization a rough idea of the investment costs used in managing risks. A thesis submitted to the University of Bedfordshire in partial fulfilment of the requirements for the degree of Doctor of Philosophy.

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The main advantage of the literature review section is that by using different available sources, the base of the research becomes strong and the reader is able to get ample amount of information, which enables him to make best step in making the research a relevant one William and Trochim After analyzing the different available sources, the research becomes sound and strong and the reader is able to know what are the real problems associated with the research topic and what appropriate measures could be taken to cope up with the problem.

The recession tampered with system infrastructures and processes. The increased global economic uncertainty caused by the recession made financial institutions to revolutionize their reporting structures, management information systems and policies with regard to risk management and risk appetite governance The Telegraph , pr1-pr 5.

The recession did not only increase the role of management in the business but also affected the decision making process of many financial institutions, impaired long term decision making and tampered with the balance sheet Ernst and Young Many banking institutions were forced to reevaluate their stand on business risks, the banks had to look for ways to curb the current high level of risk, some of them did this by, increasing the number of employees dealing with risk management, Because of the above changes, there has been a great change in the stand of many organizations with regard to risk Loeb , p Therefore many banks have come up with risk management strategies which will see to tit that the industry recuperates, get used to the prevailing economic environment and continue with business The Telegraph , pr1-pr 5.

A recent research carried out by Ernst and Young shows that there are five main challenges that banks are facing with regard to risk management Ernst and Young When executives were asked the main that they face when it comes to risk management and control, five issues quickly emerged.

When these five issues are consolidated they represent a picture of a business industry struggling to go back to business in very uncertain economic environment with very high liquidity Loeb , p The greatest challenge that the banks are facing is the issue of frequent regulatory changes, hence increasing the uncertainty Tarantino New rules and regulations governing trading activities are expected to be formed; such rules are expected to increase restrictions on risk management and equity allocation Loeb , p The level of strictness and the time that such rules will be affected are still uncertain.

To reduce the uncertainty, businesses have taken the initiative to try to project what such rules have in store for them so as to switch their operations to be in sync with the anticipated regulations Loeb , p The task of projecting such rules is not an easy task for the company executives, the task is rather time consuming and tiresome for the company executives Loeb , p The new financial regulations are expected increase requirements with regard to equity and liquidity.

Such requirements will have changes such as; the banks will be forced to review their equity allocation procedures Loeb , p This poses many obstacles to companies in the banking industry Ernst and Young Many companies have argued that the new regulations will have them allocate their operating capital equally throughout their business units something that they are not used to Ernst and Young The new regulations have made banks to violate their minimum requirements with regard to capital levels Loeb , p Banks which are not reviewing the way they allocate their capital have put up strict procedures to govern the way capital is managed by the business Jobst The banks are doing this by trying to forecast their future position when a certain capital allocation procedure is used Jobst Trading in an unpredictable economic environment: These force businesses to develop short term business strategies which are not advisable Ernst and Young Repairing the statement of financial position: Change in risk management culture: The banks are reviewing and strengthening the way they approach the issue of risk management with the senior members of the management team being involved in risk management The Telegraph , pr1-pr 5.

A recent study conducted by Ernst and Young shows that, most of the top management members have mentioned the change in which risk is managed in organizations as one of the challenges to risk management in united kingdom banks Ernst and Young Most of the company executives believe that the way to navigate through the global economic recession successfully is to reevaluate and increase their focus on risk management and governance The Telegraph , pr1-pr 5.

This has made the top managers of most banks to go back and review their risk management strategies. The following are the most common risk management ways that the managers have taken up in their quest to review their risk management strategies Stulz The risk acceptance level must be subjected to thorough revision so as to establish the acceptable risk level for every sector of business.

The risk level must be set in line with the business goals and strategies The Telegraph , pr1-pr 5. There should be a good connection between day to day management and the set risk parameters, there should be total connection between the acceptable risk boundaries and the risk level set by the executives and board of directors. According to Ernst and Young this is referred to as redefining a risk appetite Barlett , p Improving risk identification methods: Other companies have decided to come up with committees which will be focused mainly on risk management; such committees are mainly comprised of managers drawn from various departments of the bank The Telegraph , pr1-pr 5.

These departments include information technology, accounting and finance. Most of the banks have also increased risk assessment with regard to product development Ernst and Young Most banks have decided to induce risk management process to each stage of the product development.

The new risk management measures include tracking new products throughout their life cycle The Telegraph , pr1-pr 5. Information regarding current scenario of the risk management practices in the banks of the UK. In the present business environment, where the norms of the business, and the needs and demands of the customers have changed dramatically, the working standards and norms of the banking industry have also seen some drastic changes. In such type of changing environment, different kinds of new challenges are faced by the banks and financial institutions.

Broadly, theses challenges can be divided into five important categories namely, new equity regulations, repairing the statements of financial position, regulatory changes taking place frequently, and changes in the overall culture in the risk management system. The business environment of the developed countries like the UK became very vibrant and dynamic. In addition to this, there are a number of different types of rules and regulations related to financial and equity market of the UK, that have been imposed by the government of the country.

According to these types of new financial regulations in UK, the banks are needed to increase their minimum requirements of the capital levels. For the proper governing of the system, on the basis of which the overall capital of the banking business is managed, the banks and other financial institutions are using different types of methods and procedures on the basis of which, a prefect future forecasting and positioning of the company can be done.

Furthermore, the present global economic depression, which has struck the global economy seriously, has also made conditions very tough for different banking and financial institutions. A huge amount of uncertainties exist in the global business environment, which is preventing different banking and financial institutions to have a long term business plan.

Because of this reason, nowadays, the banking companies are giving more emphasis on the short term planning and strategies which are viable for the short term planning. In such type of risky environment, the process of decision making also has changed drastically. The participation of the employees in the process of decision making process, conducted by the top level management is increasing.

The banks are reviewing and strengthening their procedures for better management of the risk. As the literature review and findings from the cases of Barclays and HSBC is suggests, it has become necessary for the banking and financial institutions to cope up with these types of changing conditions of the banking business Kreimer, Arnold and Carlin For coping up with the above mentioned challenges, there are a number of different ways which are being followed by the banking institutions working in the UK.

One of the important methods for this purpose is the reassessment of the risk acceptance level. After the incidents of downfalls and bankruptcy of large financial institutions and banks in the recent time period, the banks are imposed to revise their acceptable level of risk. The banks should set some acceptable level of risks, according to their capacity and good will of the clients. There must be a flexible level of risk for different types of customers. Further, it also can be revealed that the methods employed by different banking institutions are not capable enough for averting different types of risks, which present various hurdles in their operations.

For this, there is a strong need of the improvements in the current practices. There are different type of risks including credit risk, operational risks, liquidity risks, market risk, interest rate risk foreign exchange risk, specified issuer risks and reputation risks, which are being generally faced by the banking and financial institutions in the present scenario Greuning and Bratanovic Increasing interest in various risk types: This has made banks to shift and focus on the main form of risks facing the banks.

The following are the key types of risks facing banks Ernst and Young Banks have developed mechanisms that thoroughly analyses persons requesting for loans and their respective guarantors HSBC , pr 4.

Banks have also developed teams responsible for credit risk control. The main responsibility of such teams is to ensure that the credit risk being faced by the bank is greatly reduced HSBC , pr 4. The main type of risk assessed is normally environmental risk Barclays , pr 5.

The banks also ensure that the way the document information is in line with the prescribed standards HSBC , pr This was agreed after the liquidity of banks raised during the global economic recession Barclays , pr 5. After the recession most of the players in the industry agreed that liquidity is something to be considered when it comes to risk management Barclays , pr 5.

During the global economic recession, the market was highly volatile but the volatility has reduced in recent times HSBC , 6. However, the impact of this high market volatility is one that cannot be forgotten, this has therefore made it an issue of the top management so as to ensure the bank is prepared when such a situation occurs in the future HSBC , pr 6.

HSBC has set up objectives with regard to the risk posed by mortgages, foreign exchange and other market risks that the company faces HSBC , pr 6. The market risk management team works in accordance with the acceptable risk that has been set HSBC , pr 6. In the work of Henie he describes three different kinds of major risks, the first he describes as consumer risk, second is corporate risk and the third sovereign which are also referred to as country risk.

In a dissimilar view, Horcher , explains credit risks in six different forms, they include settlement risk, concentration risk, default risk, counterparty pre-settlement risk and counterparty sovereign risk.

Given the wide-ranging effects of these individual credit risks on the operations of banks during and in the aftermath of the financial crisis, more emphasis has been increasingly placed on credit risk management in UK corporate governance.

Since the assumption of the crisis, more stringent measures on credit risk management has been imposed on banks all financial institutions by the UK financial ombudsman, the FSA.

The authorities have since placed a minimum standard requirement on all banking operations while credit rating management as well as larger exposure restrictions have been employed.

Although some changes are still on the way to further manage the severity of the credit crisis, for example the Basel 3 arrangement which will be implemented by However, the little changes instituted so far have had tremendous impact on credit risks in UK banking.

In light of these changes as well as the impending changes to the management of credit risks, the proposed dissertation would seek to understand and explore measures to credit risk management and importantly the impact of credit risks on banks.

How does it affect profitability and what are the best approaches to measuring risks. The next section explains the rationale as well as the aims and objectives of the dissertation in addition to the research question which would help to navigate the rest of the chapters. The main rationale behind the proposed dissertation is to gain further understanding of credit risk management in UK banks and indeed to contribute to scarce literature on risk management measures.

This would be done by investigating the effects that credit risk has on banks profitability. Achieving the stated purpose would entail reviewing the current credit risk management of these banks over a certain period of time and comparing them to profitability at the same period of time, in order to ascertain the effect that risk management practices have on eventual profitability. Policy wise, the results from the proposed dissertation could help policy makers enact certain laws that could protect financial institutions from future systemic collapses in the wake of potential financial crisis.

The dissertation would entail the quantitative review of financial data of the stated banks especially in terms of credit risk ratios such as Non-Performing Loans and Capital Adequacy Ratio, measured against profitability ratio and return on Equity ROE.

To what extent does credit risk management affect the profitability, measured in terms of Return on Equity, within UK banks. Given the underlying background and the importance of coherence, flow and understating — the rest of the dissertation will be divided as follows:. The introduction chapter one would include all relevant information on Credit risks, risk history of UK banks, a brief background of the four UK banks being assessed, and an overview of the effect of the financial crisis on risk management.

The literature review would entail a survey of existing research on credit risk management and its effect on profitability in financial institutions.

This chapter would entail an extended description of the method in which we intend to quantitatively measure the effect of risk management practices within the banks, against its ROE. This chapter would include a breakdown of the results derived through quantitative analysis of all relevant variables.

A descriptive overview of all results would be displaced within this chapter. The final chapter would include an overview of the methodology utilised in answering the research question, then compare the results of the research to the literature review, in a bit to accurately depict how exactly risk management affects profitability.

According Shanmugan and Bourke , financial institutions are important parts of the economy based on their main role which is to provide financial resources for economic growth. Banks are a key part of those financial institutions that provide this useful service to the economy, as they play one of the most critical roles to developing and developed economies, especially when borrowers do not have access to capital markets Greuing and Bratanovic, Loans constitute a large portion of the assets within a bank, its biggest revenue generating asset and also the most illiquid and risky Koch and MacDonald, According to Auronen , it is hard for financial institutions to distinguish good borrowers from bad borrowers, though banks rely hugely on existing technology and algorithms, thereby leading to potential adverse selection and moral hazards, being the major cause of non-performing accounts in banks Shanmugan and Bourke Knight defines risk in terms of the variability in actual outcome of an action or event as opposed to that expected, irrespective of whether that outcome is worse than expected or better than expected.

Managers and Investors are often more concerned with opposing the downside as much as possible, whilst protecting the upside benefits Meulbroek, , thereby giving rise to a seemingly skewed perception of risk within an organisation. This new ideology opposes that of Modigliani and Miller who argued that risk management should be left to investors and not the bank. Credit risk management is relevant under conditions of incomplete and imperfect capital markets, it enables managers to stabilise their operating cash flows, which in turn helps to facilitate efficient planning of future capital investment decisions and strategic development of operating activities Froot et al, The subsequent reduction in cash flow volatility reduces the cost of financial distress within the bank; smoothes tax charges and reduces investors monitoring cost Meulbroek, Credit risk management is also preferable to investors risk management, due to the superior access of managers to risk management instruments and for other information asymmetry benefits Joseph and Hewins, Commercial banks within developed and developing economies face various categories of risk, which according to Cornett and Saunders falls broadly into financial, operational and strategic.

These risks impact differently on the performance of the bank, and the risk magnitude caused by credit risk is severe enough to cause bank failures Chijoriga, According to Chijoriga, there has been an increased number of significant bank failures in recent years, in both matured and emerging economies, and a significant reason behind these, are credit problems, especially weakness in credit risk management.

Loans constitute a large portion of credit risk, and normally account for 10 — 15 times the equity of bank Kitua, Thus banking business is likely to face difficulties even when there are slight deteriorations in the quality of loans. Bank risk management , the subject of this dissertation , is about nbsp; Modelling Risk Management in Banks: Examining — ScholarWorks and Doctoral Studies by an ineffective risk management in banks , coupled with poor corporate governance practices Banking Ordinance to help reduce incidence of bank failures.

A study of risk management in the banking industry in the United Arab would not have been possible without the valuable support , patience amp;. Credit risk management must play its role so as to help banks be in. This thesis would not be possible without the input and comments from the results were conclusive that risk management in Swiss banks changed nbsp; Exploring risk perception and management in UK banks — University of Thesis submitted to the University of Essex for the degree of.

Doctor of of my research and his role in helping me secure funding for the interviews. Bank managers 39; perception and management of risk. Risk management in banks has changed substantially over the past ten nbsp; evaluation of credit risk management policies and practices — Theseus hope that this thesis will be of great help to the bank when it comes to procedure Risk, Banking Risks, Credit Risk, Credit Risk Management nbsp; Credit risk control for loan products in commercial banks.

Support and guidance of the nbsp; Credit risk management in the current — DSpace at Cardiff Met examined five large commercial banks in China and industry, covering some aspects of credit risk management , banking profitability and In order to help the financial system to recover from the recession,. I hope Key Words:

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Most banks are still developing technology that will complement the risk management teams in the process of developing risk management policies and procedures so as to make the process of risk management in banks more efficient (All business , pr 10).

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Bank risk management, the subject of this dissertation, is about nbsp; Modelling Risk Management in Banks: Examining – ScholarWorks and Doctoral Studies by an ineffective risk management in banks, coupled with poor corporate governance practices Banking Ordinance to . Help On Dissertation Risk Management In Banks. help on dissertation risk management in banks Download This New, Free SAS White Paper on Banking Risk Accredited Program w/ No GMAT, GRE, or Thesis Required.

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