SCHOOL OF FINANCE AND COMMERCE

TOPICS
SOURCE OF RISK , TYPE OF RISK DEALT BY TREASURE
MANAGEMENT, IMPLICATIONS AND LIMITATIONS OF RISK
MANAGEMENT

TOPICSOURCE OF RISK , TYPE OF RISK DEALT BY

TREASURE MANAGEMENT, IMPLICATIONS AND
LIMITATIONS OF RISK MANA

SUB CODE –MBAF6022 SUBMITTED TO – NIKITA

MARKET RISK
Market risk refers to the variability of
returns due to fluctuations in the
securities market. All securities are
exposed to market risk but equity
shares get the most affected. This risk
includes a wide range of factors
exogenous to securities themselves like
depressions, wars, politics, etc.
INTREST RATE RISK
Interest rate risk is the variability in a
security’s return resulting from
changes in the level of interest rates.
Other things being equal, security
prices move inversely to interest rates.
This risk affects bondholders more
directly than equity investors.
BUSINESS RISK

This refers to the risk of doing business in a

particular industry or environment and it
gets transferred to the investors who invest
in the business or company

FINANCIAL RISK

Financiall risk arises when companies

resort to financial leverage or the use of
debt financing. The more the company
resorts to debt financing, the greater is the
financial risk.
RISK DEALT BY TREASURY
MANAGEMENT
INTRODUCTION

Risk management is at the heart of most

treasury operations, and it is helpful to
situate the risks managed by treasury
within the overall risk map of the company. 

The primary financial risks for which

treasury is responsible for can be
categorised into:
Liquidity risk (i.e. availability of funds)
Price risk (i.e. commodity price risk)
Credit risk (i.e. financial loss)
Operational risk (i.e. treasury processes,
payments, etc.)
Liquidity risk
Liquidity risk is treasury’s main
responsibility – to ensure that the
business has sufficient funds to
continue its operations through the
economic cycle, as well as sufficient
funds for strategic opportunities (if
required by the board). The main
processes for dealing with liquidity
risk are capital structure and cash
management.
Price risk

Financial market price risk – the risk

posed to the busiess from changes in
market prices for FX and interest rates–
is another core treasury responsibility.

FX is the main price risk for most

treasuries, because any business with
international sales or procurement will
generate FX exposures.
Credit risk is a major focus for most
treasuries. Usually treasuries are
responsible for managing the credit risk
of their financial counterparties such as
banks

Operational risk covers all processes, so

managing it requires solid and holistic
expertise, people, policies and
processes. Again, treasury needs to
balance risk and cost to find the most
effective solutions for the business
 IIMPLICATION OF RISK
MANAGEMENT
Recovery and resolution planning (RRP)

Currently underutilized in the management

process of banks are RRP elements.
COVID-19 causes triggering of recovery
indicators due to macroeconomic
developments and decline of the liquidity
position, and therefore an activation of the
escalation governance
Banks should review for usability and
recalibrate their recovery options and
the suitability of indicator thresholds.
The current crisis also requires an
adaptation of the recovery planning
scenarios.
Operational resilience, compliance and
non-financial risks

Banks’ internal control systems are under

extreme stress, leaving a margin for
potential losses due to crisis-driven
measures. Almost overnight, COVID-19 has
become the single greatest threat to the
continuity and existence of many
businesses. 
Enterprise risk and capital management

deteriorating credit quality may lead to a

massive rise in credit impairments, and on
the other, banks are expected to continue
lending and supporting the economy –
leading to higher exposures in the
downturn of the credit cycle.

In response, many regulators across the

globe are allowing banks to use their
capital buffers to cover the losses while
continuing to lend. However, eventually
banks will need to refill their capital buffers
and return to a sustainable capital level.
LIMITATIONS OF RISK
MANAGEMENT
Not Suitable For All Organizations

The first disadvantage of using an

automated risk management
information system is that it may not be
useful for all companies. These systems
are only useful for companies that have
a certain kind of profile. Some of the
characteristic features of such
companies are as follows:
Expensive

Risk management information systems

can be quite expensive. They are often
sold as standalone software solutions or
as solutions that can be integrated with
the overall enterprise resource planning
software.
Data Security Issue

Lastly, risk management information

systems collate all of the organization's
important data in one place. This creates
data security risks. If the risk
management information system is
hacked, it could cause severe damage to
the company
REFERENCES
https://www.managementstudyguide.com/dis
advantages-of-risk-management-information-s
ystems.htm

https://seprianhidayatamin.org/2016/04/22/7-
sources-of-financial-risks/

https://treasuryprism.dbs.com/treasury-conce
pts/
risk-management
THANK YOU
GROUP MEMBERS

CHANDAN KUMAR
AYUSH GAUR