FOREIGN EXCHANGE & RISK MANAGEMENT

RISKS FACED BY ALLIED BANK LTD

PRESENTED TO
Dr. WAQAS AHMED
PRESENTED BY

MISBAH JAMIL ROLL NO: E18MBA048

IRAM SHAHZADI ROLL NO: E18MBA016
AQSA SHAUKAT ROLL NO: E18MBA042
MAIRA FAYYAZ ROLL NO: E18MBA035
SHIZA SHABBIR ROLL NO: E18MBA012
DATED: 16 Dec,2020
MISBAH JAMIL
E18MBA-048
ALLIED BANK LTD.
 CORE VALUES

 Integrity
 Excellence in Service
 High Performance
 VISION STATEMENT

To become a dynamic and efficient bank providing integrated

solutions in order to be the first choice bank for the customers.
 CREDIT RISK

Risk of inadequate / failed internal processes and losses

caused by external events.

BASIC MEASURES OF CREDIT RISK

 Credit score
 Bond Credit Rating
 CREDIT SCORE

Lenders use credit risk scores in order to allow or reject the

loan application. 
 BOND CREDIT RATINGS
 Publicly traded companies that
issue bonds have been rated by
rating agencies like Moody’s, 
Standard and Poor (S&P), Fitch,
etc. The rating is a grade in an
alphabetical format that gets
assigned to a bond.
CREDIT RISK EXAMPLE
 MARKET RISKS

 Risk associated with fluctuations in

interest rates, foreign currency rates,
credit spreads, equity prices and
commodity prices
 OPERATIONAL RISK

 Operational risk is the risk of loss due to errors,

interruptions, or damages caused by people,
systems, or processes.
MAIRA FAYYAZ
E18MBA-035
Enterprise Risk Management:
Interest rate risk

Interest rate risk is the risk that arises for bond owners from fluctuating interest
rates.
Types of Interest Rate Risk
Currency Exchange Rate risk
Exchange Rate risk or foreign exchange risk(forex), is an unavoidable risk of foreign
investment, but it can be mitigated considerably through hedging techniques
Enterprise Risk Management:
IRAM SHAHZADI
E18MBA016
 Foreign exchange Risk for Banks

 Foreign exchange rate fluctuations affect banks both directly and

indirectly. The direct effect comes from banks’ holdings of assets
(or liabilities) with net payment streams denominated in a
foreign currency. Foreign exchange rate fluctuations alter the
domestic currency values of such assets. This explicit source of
foreign exchange risk is the easiest to identify, and it is the most
easily hedged. The indirect sources of risk are subtler but just as
important. A bank without foreign assets or liabilities can be
exposed to currency risk because the exchange rate can affect the
profitability of its domestic banking operations.
 Measures of foreign exchange risk

 The direct sources of foreign exchange risk can be gauged

by tallying up the net positions on a bank’s assets and
liabilities that are denominated in foreign currencies. By
itself, this gauge of direct exposure can provide only a
narrow assessment of the bank’s exchange rate sensitivity
since — as described above — the value of the bank’s
domestic assets also will vary with the exchange rate.
Anti-Money Laundering

 Banksor the banking sector are under the obligation of Anti-

Money Laundering because they are at risk of financial crime.
AML regulations contain measures that companies must take
to detect and prevent financial crimes, and these regulations
are determined by AML regulators and are a guide for
businesses. There are hundreds of local and global regulators
in total, doing AML studies in the world. Although all
regulators aim to prevent financial crimes, regulations vary
from country to country and from region to region.
 Some measures to mitigate Banks Risk

 AML Compliance Program of Banks

 Risk-Based Approach in Banking
 Know Your Customer in Banking
 Customer Due Diligence in Banking
 AML Name Screening Software
 Transaction Screening Processes of Banks
AQSA SHOUKAT
E18MBA-042
 It effect of behaviour of Producers. Retention and transfer
are its types. Loss exposure can eliminate on this.
 FACTORS
 Underwriting Cycle
 Consolidation in Banking Industry
 Capital Market Alternative
 Underwriting Cycle
In this commission are measure at time.

 Consolidation in Industry
Consolidation means manages the things.
 Cross Industry Consolidation

 Banks have large dealing with customers in or outside

country so they have high consolidation
Capital Market Risk Financing Alternatives
If Bank Finances to customer and loss occurs the bank deal
itself.
Loss Forecasting:

Bank identify the risk and loss history and it has two parts.

Probability
Chance of loss will occur probabilities of events that occur.
Independent
 Dependent

Regression
Two or more variables of loss are in it.
 Difficult to analyse the prediction.