Risk Management
Article Index
Risk Management
Operational Risk
Credit Risk Management
Market Risk Management
Foreign Exchange Risk Management
Liquidity Risk Management
Supervisory Review

Being a financial institution, risk management is an integral part of Nepal Investment Bank Limited (NIBL). With the continuing increase in the scale as well as complexity of  the banking business and the rapid growth in the volume of financial-related transactions, risk management has become essential.

 

Moreover the current financial crisis, which brewed due to financial institutions' high exposure to risky assets, and the collapse of venerable financial institutions such as Lehman Brothers, Wachovia and Bear Stearns, among others due to their inability to manage risky assets have further emphasized the need for prudent and effective risk management. The management team of NIBL manages the overall risk profile, aiming for a good balance between risk and return.

Risk management in the bank includes risk identification, measurement and assessment, and its objective is to minimize negative effects that risks can have on the financial result and capital of a bank. Risk management strategies include the transfer of risk, avoidance of risk, reduction of the negative effect of the risk and acceptance of the consequences of a particular risk. The design of a risk management system depends among other things, on its size, capital structure, complexity of functions, technical expertise, and quality of Management Information System (MIS) and is structured to address both banking as well as nonbanking risks to maximize shareholders’ value.

The risk management system ensures that the bank takes well-calculated business risks while safeguarding the bank’s capital, its financial resources and profitability. The bank’s primary business activity is commercial banking where substantial risk comprises of credit risk. To a lesser extent, commercial banking activities also expose the bank  to market risk arising from repricing, maturity and currency mismatches of assets and liabilities. These mismatches give rise to interest rate risk, liquidity risk, and foreign exchange risk. The Board of Directors of NIBL recognizes that a critical factor in the bank’s continued growth, profitability and stability lies in its effective risk management capabilities and risk return trade-off. In this respect, the bank ensures its risk management capabilities and also continuously promotes a pro-active risk management in the bank.

 



 

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