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Risk Management in Banking
“The first step in the risk management process is to acknowledge the reality of risk. Denial is a common tactic that substitutes deliberate ignorance for thoughtful planning.” Charles Tremper.

Introduction
What is Risk Management? “Risk that you control are much less a source of outrage than risks that are out of your control”Peter Sandman.

In the course of their operations banks are invariably faced with different types of risks that may have a potentially negative effect on their business. Risks arise because of limited knowledge, experience or information and uncertainty about the future or through changes in the relationships between parties involved in an undertaking.

Risk Management provides a structured way of identifying and analyzing potential risks, and devising and implementing responses appropriate to their impact. And its objective is to minimize negative effects risks can have on the financial result and capital of a bank. These responses generally draw on strategies of risk prevention, risk transfer, impact mitigation or risk acceptance.

Risk Management processes assist planners and managers to systematically identify risks and develop measures to address them and their consequences. The aim is to produce more reliable planning, greater certainty about financial and management outcomes and improved decision making.

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Risk Management Process“Good Risk Management fosters vigilance in times of calm and instills discipline in times of crisis”Dr. Michael Ong.
Risk Management Process
Risk Management Process Risk = probability of event x cost of event 
Risk Management Process Risk Management Process  Conclusion
References
New South Wales Treasury, (2004). “Risk Management Guidelines”. www.treasury.nsw.gov.au.

Anthony M. Santomero (1997). “Commercial Bank Risk Management: An Analysis of the Process”.

David H. Pyle (1997). “Bank Risk Management Theory”.