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Modern financial institutions risk management system and its development trend of the operation


In the traditional financial activities, financial institutions for financial intermediation is seen as organizations and institutions; However, with the development of modern financial markets, modern financial theory is stressed that the financial institutions is the production of financial products to provide financial services to help customers effectively manage both risk-sharing risk to their own profit, financial institutions profit from the risk premium is the risk. Therefore, in the new economic and financial environment, financial institutions can not exist because of the financial risks of risk aversion and simple passive, can not completely eliminate the risk, because the financial risks can be managed, but not completely eliminated. Therefore, the decision in the modern financial markets, a level of competitiveness of financial institutions to determine their viability level of the key and core, is its ability to effectively carry out comprehensive and effective risk management, can take the initiative to take risk, management risk, establish a good risk management framework and system, with a good profit pricing of risk. In risk management,[link widoczny dla zalogowanych], some large Western financial institutions (in this our major investment banks collected some information) in the long-term business practice has accumulated a rich experience, worthy of our summary, comparison and reference.

modern financial institutions are risks: market risk, credit risk, operational risk and other risks, chief among which is the market risk and credit risk. Control of these risks are mainly achieved through the following three basic factors: (1) Board of Directors to determine the overall risk management principles and basic control strategies; (2) to determine the organizational structure and risk management systems; (3) designated risk management set of policies and procedures; (4) the use of technology to monitor risk management tools. Because risk management expertise, we will not be discussed here.

in a specific course of modern financial institutions in controlling the basic measures of risk are: decentralization, transaction limits, credit limits, that is, through their products, trading partners, the decentralization of operational activities for risk reduction; through for each product, each trading unit set trading limits for each trading partner has a credit limit to avoid risks. Financial institutions, according to the profitability of the business, market opportunities, the company's long-term strategy on a regular basis to adjust the various business, capital allocation between the various departments to try to make access to benefits given to minimize the risk.

a Board of Directors on the overall risk management philosophy and basic risk management strategies to determine

Overall, the board of directors of financial institutions bear the ultimate responsibility for the risks and obligations, it should take control functions. The company's overall risk management and control policies by the Board for approval, strategies and policies to ensure compliance and to maintain flexibility, decision-making bodies should be through a separate risk management department and an independent audit of internal departments to implement and assessment.

(a) identify the basic principles of risk management

general, financial institutions, the board must first determine according to their own market positioning and the basic concept of risk management principles and requirements of the Risk Management Committee and the corresponding risk management departments to actively implement them.

we can briefly compare companies such as Merrill Lynch and JP Morgan's risk management principles.

1 Merrill Lynch's risk management principles

at Merrill Lynch, despite the risk management methods and strategies for a change and then change, but based on the following six principles of the basic concept of almost not changed. This includes: any program of risk aversion, the most important tool is the experience, judge and continuous communication; must continue to strengthen the discipline throughout the company and risk awareness; management must be clear and concise statement under caution: in the capital operations which can be done and what not to do; risk management must take into account unexpected events, and explore potential problems, detect deficiencies, to help identify possible losses; risk management strategies must have the flexibility to adapt to a changing environment ; risk management, the main goal must be to reduce the unbearable losses. This loss is usually not expected from the event, most of the statistical and model-type approach to risk management could have foreseen.

in the past few years, the use of mathematical models to measure the market risk has become a world of many elements of risk management, risk management, risk measurement has become almost synonymous. Merrill Lynch believes that the use of mathematical risk models can increase reliability, but can not provide a guarantee, therefore, depends on these mathematical models is limited.

fact, mathematical models can not accurately quantify the risk of significant financial events, so, Merrill Lynch just as other risk management supplement.

Overall, Merrill Lynch believes that the main risk of a product not the product itself, but the product management approach. Disciplinary or regulatory failures can lead to the loss, regardless of why, or what mathematical model.

2 Morgan's risk management principles

Morgan Stanley believes that the business risk inherent characteristics of financial institutions, and financial institutions, hand in hand. Business activities of financial institutions will be involved in a variety of risks, and how appropriate and effective identification, evaluation, monitoring and control each risk, its results of operations and long-term development is at stake. Company's risk management is a multifaceted problem, is a professional with the relevant product and market continue to carry out information exchange, and to evaluate the independent regulatory process.

should be said that these basic principles of both its long-term risk management, risk management and experience, but also the implementation of the basic knowledge of risk management guidelines, risk management system in the whole occupies a very important position.

(b) to determine the basic procedures for risk management established by the Board

risk management and control strategies of the first step is scheduled according to the principles of risk management and risk-based capital ratio on the situation, the company business activities and risks analysis. Based on the above analysis, we should require each of the risk of primary or limits on the number of products, approval of the specific scope of business, and should have adequate capital to support it. Since then, the response to the ongoing business and risk routine examination, and in accordance with the change of business and market strategy on a regular basis to reassess its conclusions should report directly to decision-making.