Managing Risks in Investment Banking

1. CIBP™ Standards Examination  Insights Partner IBCA  myIBCA   Managing Risks in Investment Banking Mar 05, 2021 | Editorial Team The primary component of the investment bank’s risk management strategy Most Popular is the risk appetite based on the current and future risk pro?le, as determined by the Investment Bank’s Council. The Future of Investment Banking: 2022 and Beyond Risk management involves the identi?cation, analysis, and response to risk factors that are part of a business life cycle. A good risk management structure involves  the calculation of the uncertainties and prediction of their in?uence on the The Role of Big Data in Investment Banks business.  A perfect risk management structure supports proactive risk management and other risk mitigation systems too, such as planning, budgeting, and cost control. As a result, the business will not face many surprises.  Investment Banking Industry and Covid-19: Building and Maintaining Resilience How AI and ML can Fight Against Money Laundering in Investment Firms At investment banks, the risk management strategy is approved by the Council, revised, and evaluated on an annual basis. Risk classi?cation Investment banks engage in different types of businesses and as such, each type is associated with a speci?c set of risks. Depending on their sources and impact, they are grouped as follows. Get Started Simple tips to managing risks at investment banks This is how investment banks can manage risks at different levels. Market risk management: Monitor, measure, and manage - liquidity, interest rate, foreign exchange, and commodity price risks through an all-inclusive dynamic framework. Assess potential problems through stress testing. Credit risk management:

2. Maintain credit exposure within the acceptable parameters. Make lending decisions based on the credit score. Gauge how much a bank stands to lose on credit portfolio. Operational risk management: Establish internal audit systems. Assess and eliminate weak control procedures. Train the staff at all levels Legal risk management: Conduct all activities within the regulatory frameworks Liquidity risk: Diversify Secure back-up funding Limit cash ?ow gaps Reputational risk: Demonstrate business integrity Manage social media, feedbacks, and reviews Secure data and data integrity Foster a productive workplace Key takeaways Though the above principles and information are helpful, they may not fully address an investor’s concerns. The risk equation is dependent on how people view gains and losses. Tversky and Kahneman documents that, “investors would put twice the weight on the pain associated with a loss than the good feeling associated with a pro?t”. Risk occurs everywhere! While we think of risk in negative terms, the investment world has a different note as risks are inseparable from the desirable performance. If the investors believe they can tolerate the risk, both at an emotional and ?nancial level, they invest! Another behavioral tendency is the ‘drawdown’. The magnitude, duration, and frequency of a negative period are considered while measuring drawdown. Drawdown is the period during which the asset’s return is negative in relation to the previous high mark. Risk management is closely associated with psychology too! What is your risk equation? Share with us. Stay Informed! Keep up with the latest in Investment banking with the IBCA newsletter. Subscribe Get Started CIBP™ Examination Partner IBCA Standards     Candidacy Tracks About CIBP™ Exam Universities & Insights 2802 Flintrock Trace Austin, Business Schools Fees Exam Format TX 78738 FAQs Study Material Exam Coverage info@ibca.us.org CIBP™ Exam System Requirements Digital Badge Exam Policies Application Process Exam Day All activities related to the management of customer relationships, customer-support, credentialing logistics, partner-network, invoicing for IBCA, are managed by the Edvantic worldwide network. All queries may be safely directed to info@ibca.us.org. Disclaimer: + Privacy Policy Terms Of Use Sitemap

3. ©2023. Investment Banking Council of America. All rights reserved. Get Started