Table of contentsThe concept of risk management and credit riskRisk managementRisk identificationRisk measurementRisk analysis or assessmentRisk controlRisk monitoringThis chapter is devoted to a broad explanation of the theoretical framework /literature evaluated and advanced so as to provide insight and in-depth expertise of this work. This begins with an assessment of the concept of credit risk management. Well-known RM ideas or practices are then analyzed. He continues with the theoretical literature to expose that although risk and value/return are linked, banks still attempt to control this, which allows them to achieve their goals. It facilitates the identification and production of a rationalization of approximately existing thoughts on the thesis topic and concepts that are relevant to peers if they are coherent or have implications for the field of study. It also allows the reader to identify/exploit information on existing ideas on the subject, principles and theories that are relevant and especially if there are consistencies or implications in the field of studies. Say no to plagiarism. Get a Custom Essay on “Why Violent Video Games Should Not Be Banned”?Get an Original EssayThe Concept of Risk Management and Credit RiskRisk ManagementRisk management, in the best understood definition, can be defined as the act of planning, directing, controlling, following, and trying to achieve favorable results. Or it is clearly the act, manner or practice of manipulation; manipulation, supervision or control. In contrast, risk can be described as the possibility that something unsightly or dangerous will happen. When agencies engage in business, it is obvious that they will be exposed to one type of risk or another, which in most cases constitutes uncertainty, although sometimes they can be sure that it will occur . Banks are among those agencies whose risk is very positive because they are not isolated given the dynamic environment in which they operate, the volatility of the FMs in which they participate, the diversification and the aggressive environment in which they are established. Even if it is certain that a risk will occur, in most cases it is not always viable to eliminate, reduce or mitigate it. So, the pleasant opportunity for businesses is to attempt to control the threat in order to reduce the possibility of its prevalence or mitigate its consequences. These opportunities can range from “doing nothing at all” to attempting to undo the effect of each diagnosed hazard. But, due to the nature of banking, a financial institution cannot afford to do nothing at all or call off the threat. So all she does is stay with it but look for a way to control it. Given the risky nature of its activities, a bank does not wait to introduce risk management at a certain level of its activities but does it do it from the start? Indeed, its activities are so correlated that if they are not well managed, the impacts/consequences can be linked and could even cause bankruptcy. For this goal to be achieved, selection managers must first discover the luck involved, measure its intensity, determine it, filter it, and then seek measures to manage it. This act of risk management is called RM. RM is "a planned direction of action to reduce the risk of an event occurring and/or to lessen or incorporate the consequent effects if that event occurs."product ". This linked movement trajectory gives rise to an MR process that involved certain steps. RM is very essential and is a most important part of sports of any organization as its main objective is to help all other sports management to achieve the goals of the organization without delay and properly since it is a continuous technique.it depends on both changes in the internal and external environment of the organization. Looking at the process in stages, this suggests that before risk can be managed, it must be identified. Once the risk has been identified, measures are taken to measure its depth or to assess the outcome of the danger, an evaluation of the results is underway, handling measures are then put in place in the region to avoid or reduce its intensity, and then monitoring is underway to see if the expected results are those desired. Risk identification cannot be carried out until the risk has initially been identified. In this method, if there are no hazards identified, then there is no need for risk management. This identification is carried out through the use of different strategies that rely on the company in question to consider all the varieties of threats it may face, present and future. Thus, the identification of threats is the first step of the RM method which develops the premises of the following steps. If success is not achieved at this level, then the risk may become unmanageable. In this way, the company will no longer consider the threat or take any action associated with it and the consequences could be very unexpected. In this way, the dangers associated with gains and losses must be identified. The inability to become aware of the risk is as inappropriate as discovering the other. Risk identity therefore involves a comprehensive assessment of all present and future risks within business enterprise operations, asset management and guidance services. During the incidental identification procedure, the bank is ready to observe its sports and the places in which its resources are exposed to hazards. This will particularly help him when he has to fulfill a future mission, in terms of development and application of new risk control programs. Even if all banks are aware that they face the same type of risks, the techniques for identifying the dangers may be different for each of them. It is always crucial for managers to discover all the possible dangers they may face, because any unnoticed risk can have very negative effects on the entire system. Considering the importance of hazard identification in the risk management process, managers should not give their attention to what can be ensured or mitigated, but should start with the following questions as they are put forward by the user. How can organizational sources be threatened? Can a negative impact prevent the company from achieving its objectives? What favorable opportunity can be revealed? Starting the identity at this stage will give a great kick-start to the implementation and no limitations on the type of risks to be identified. MeasurementRisk measurement is available after the identification phase to provide expertise on the nature and level/extent of the danger in order to be able to control it precisely. This is because without the magnitude of the threat, the depth of the impact or the consequences that may result from the diagnosed risk if neglected cannot undoubtedly be analyzed. A good risk size will decide the risk management strategies.threats that must be put in place to manage said luck. This will highlight the quantity and value associated with the opportunity if it arises and the agency in question then uses the known consequences to see what price is at stake or what value is associated. Proper measurement and understanding of risks is therefore important for the bank so that you can make a decision on risk in a meaningful way, but it will also significantly improve its performance for accurate and cost-effective improvement. This will also help determine how much effort should be taken or how seriously to handle the threat. For aggressive and regulatory reasons, it is very important that all banks have a solid risk sizing framework. Risk size, sincerely placed, is the assessment of the final results of chance using a set of hazard elements that can be determined and measured. A threat element is something that is likely to increase the likelihood that a specific event will occur. To measure the different forms of risk, different techniques ranging from the simplest to the most sophisticated are used. Some include value at risk (VAR), period analysis, sensitivity analysis, pressure testing, and scenario analysis. Even though all banks may face the same type of danger, each may also use different risk size strategies depending on their personal choices. Risk Analysis or Assessment Risk assessment involves understanding what is under threat and what events are likely to cause harm or benefit. . Risk is assessed in terms of severity of impact, probability of occurrence and controllability. Once this is completed, it helps the financial institution recognize the possibilities that the threat could occur, if it does occur, the impact it may have on the financial institution and how they can likely manipulate it. Risk assessment is carried out by prioritizing the hazard, either using hazard assessment or using risk assessment. This hazard analysis is entirely based on chance and results. Probability depends on how likely the hazard is to occur and how often it will occur. On the other hand, consequences can be measured by looking at the outcomes or enablers of the consequences. Knowing how often the danger occurs and the effect it will have if it occurs allows the financial institution to know how vital the threat is. The risk assessment is then carried out while a proper hazard assessment has been undertaken. An assessment is made against an appropriate luck and reputation criterion to propose a rating. For example: Low (tolerable) Medium (low as quite practical) High (intolerable) the above ranking then determines the decision or point of view of the financial institution, but what should be stated is that a decision depends on each bank independently. handling involves the use of physical measures, techniques, tools and/or personnel training to avoid, reduce, prevent or eliminate the perceived threat/its monetary and other undesirable consequences of hazards. Naturally, risk cannot be avoided or eliminated, so the only alternative is to govern it. Banks, like other groups, have unique methods for approaching dangers and the amount of risk each is willing to accept differs. Some will decide to either spare you from the danger or allow it and then start looking for measures to deal with it, while others will determine.