Abstract Banks are in the business of managing risk, not avoiding it..

Risk is the fundamental element that drives financial behavior. Without risk, the financial system would be vastly simplified. However, risk is omnipresent in the real world. Financial Institutions, therefore, should manage the risk efficiently to survive in this highly uncertain world. The future of banking will undoubtedly rest on risk management dynamics. Only those banks that have efficient risk management system will survive in the market in the long run. The effective management of credit risk is a critical component of comprehensive risk management essential for long-term success of a banking institution. Credit risk is the oldest and biggest risk that bank, by virtue of its very nature of business, inherits. This has however, acquired a greater significance in the recent past for various reasons. Foremost among them is the wind of economic liberalization that is blowing across the globe. India is no exception to this swing towards market driven economy. Better credit portfolio diversification enhances the prospects of the reduced concentration credit risk as empirically evidenced by direct relationship between concentration credit risk profile and NPAs of public sector banks. A banks success lies in its ability to assume and aggregate risk within tolerable and manageable limits

. Table of contents Subject Introduction Defining Risk Business line accountability Risk management frame work Risk management Types of risk A :Credit Risk Components of Credit Risk Management Organization Structure Systems and Procedures Credit origination Limit setting Credit Administration Board & Senior Management oversight Measuring Credit Risk Managing Credit Risk Robust Calculations for Credit Risk and Capital Adequacy Case study ( CIB 2009) B- Market Risk Introduction Risk Monitoring & Risk Controls Managing market Risk Element of Market Risk Management Board and Senior Management Oversight Organization Structure Risk Measurement Equity / commodity price Risk Trading risk Balance sheet risk C- Liquidity Risk Define Liquidity Risk Early warning indicators Liquidity risk management process Measurement and management liquidity risk Role of banks as liquidity providers

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Liquidity risk strategy and policy Internal control Liquidity risk challenges during recent market events Monitoring an reporting risk exposures D Operational Risk Defining operational risk and principles Standardized approaches Risk measurement Risk reporting Effective risk management and control E - Basel Basel one Basel two Basel three

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