Risk Management and Banking Crisis Essay Example | Topics and Well Written Essays - 2000 words

Risk Management and Banking Crisis - Essay Example The Banks & Financial Institutions avail the benefits of higher interest rates by lending to Sub-Prime customers but expose the capital to higher risks. The Banks used a mechanism of distributing the risk of the lending to the investors outside the Banking system through a process called "Securitization" (A phenomenon that occurred in the booming Credit Derivative Market). This phenomenon occurred extensively in the US Sub-Prime Mortgage Market that helped the banks to increase the number of risky products but still reduce the liabilities on their balance sheets (apparently!!) because the money is flowing through so called "conduits" from investors to the borrowers. As per experts the primary drawbacks have been imperfections in the Credit Markets given poor valuation of assets acquired against the credit instruments thus resulting in uncertain asset valuation & high credit risk exposure. Even the rating agencies couldn't predict the Sub-Prime crisis through their valuations because the securitization process was too complex and the Bank's risk assessment was inadequate in screening the borrowers and informing the investors about the risks in the securitized products. The system became so huge that the root of the risks was completely covered by hyped data and analytics about the new credit instruments. [Schmitz, Michael. C and Forray, Susan J. pp28-30; Clerc, Laurent. 2008. pp1-4] In this paper, the process of Credit & Liquidity risk measurement by the Banks is presented with a discussion on how they have contributed to the overall Financial Crisis faced by the world. A brief on Credit and Liquidity Risk Management practiced by Banks Every bank has a native underwriting process to support the "Credit Approval System" for evaluation of credit risk resulting from a possible exposure when scrutinizing a loan application. As per Basel Capital Accord (Basel-II), the primary parameters that are assessed during scrutiny of a loan application are: Probability of Default (PD), Loss Given Default (LGD), Exposure at Default (EAD) and Maturity

People in Organizations Essay Example | Topics and Well Written Essays - 2500 words

People in Organizations - Essay Example standing of the way people would react to a ‘change’ scenario and as to what their reactions would be in the wake of closing certain offices and more than that putting an end to their jobs. This brings to light the situation at NIC. The key issues which could be had in the wake of Gloria Barker’s initiatives are bringing a sense of change within the attitudes of the people as they must know that this change is for their own betterment, both in the short term scenario as well as in the long run. They must be told that these initiatives will bring in the much needed stability for the operations of the organization as well as provide incentives to the employees in different forms. However this is a totally different matter altogether that the people who are told to leave their jobs, as the offices coming under the direct hold of NIC close, will have a sense of resentment which is quite understandable but within the global contexts of a changing business climate, this is all the more common at the present. The key issues also bring to light the aspect of ‘Building the New NIC’ which is a philosophy that needs strenuous thinking and action to back up the very mindset which has been developed as a result of the same. This asks of the management culture to bring about an environment which is full of positive attitude since this is much needed at the end of the day. People must be motivated enough in their job to adopt the changing regime because if the same is missing, then there is little room for improvement within the changing culture of the organization. (Gellerman, 1968) Also the role of Human Resources Department is of essence since it must cut down on the traditional mindset that it has had of late and give up the same for the contemporary office climate as the latter will bring in employees who are better equipped to handle tasks and more learned than are present within the realms of NIC at the current stage. It will also motivate and encourage the