The efficiency of a commercial bank's risk management system largely depends on the quality of the information subsystem, the task of which is to select, store and provide information at various levels of bank management. The banking risk management system can be considered without a pricing subsystem. The profitability of operations depends on it, which means the risk and profitability of the bank as a whole. Analytical subsystem, in our opinion, is one of the main elements of the risk management system. It can be conditionally divided into two blocks, which combine analysis and assessment: individual and aggregate risks.
Analysis and assessment of the aggregate risk is carried out based on the following indicators:
- Diversification;
- quality;
- profitability.
Diversification, as a rule, is determined by industry and geography, as well as by the size of the loan, the borrower's rating and the type of ownership of the company.
An important component of the commercial bank's risk management system is the risk management toolset;
- Differentiation;
- Diversification;
- Limitation;
- Insurance;
- Self-insurance;
- Securitization, etc.
Banks approach this issue differently, taking into account internal and external factors:
- The size of their potential;
- Risky investments;
- Trends in the development of the economy in general and industries in particular;
- Prospects for the development of the region, etc.
In our opinion, the process of risk management in a commercial bank should include the following stages:
Clarification of the risk context;
Identification of risks: detection and recognition of risks and their sources;
Risk measurement (analysis and assessment): qualitative and quantitative risk assessment;
Impact on risk (choice of methods and strategies);
Risk monitoring: daily monitoring of risk limits, checking the main dimensions of risks and risks not subject to quantitative assessment;
Communication and consultation: regular provision of risk information.
Establishing the direction of the probabilistic action of risk determines the strategic and tactical goals of the bank on management in conditions of uncertainty.
Identification of risks is a stage, the purpose of which is to receive the necessary information about the structure, properties of the object and available risks. The collected information should be enough to make adequate decisions at the next stages. The estimation assumes the quantitative description of the revealed risks in which process such characteristics, as probability and the size of possible consequences are given. At the same time, a set of scenarios for the development of adverse situations is formed.
Risk assessment in the majority of Russian banks is carried out by the Risk Management Department, which is an independent service, risk management division, operational (i.e. not functional) division of the bank where risk management functions are concentrated.
Risk as a multifaceted value in its manifestation depends on the direction of the banking institution's activity, and the risk management system should focus its activities on minimizing risks and increasing income at the heart of the growth of efficiency of the bank's functioning.
The tasks of this system are as follows:
- minimization of losses;
- identification of new risks;
- increase in profitability;
- Decrease in the level of problem "toxic" debts and the like.
Considering the system through the prism of profitability increase, it is fair to note that for such a system the optimal tools of bank risk management are relevant, providing a flexible mechanism of risk management and profitability generation of banking activities in the conditions of positive market conditions in the banking segment.
In risk management, commercial banks focus on the task of determining the risk appetite, i.e. the level of risk that a credit institution may take upon itself when making a decision. To correctly assess the adequacy of the accepted risk, commercial banks may be guided by the average value of risk in the industry or by a given standard.