Banking risk management and control procedures which
The technical
development sustained in the banking industry on the one hand, and
development in the use of electronic means of electronic funds on the
other, led to an increase in banking services provided by banks and
diversity, increasing the complexity of banking operations in a market
characterized by fierce competition. To meet this development and the
risks associated with it has become necessary to control the level of
risk that takes work and control procedures necessary to control the
adverse effects of such risks and manage them properly.
The development of concepts of internal audit in banking institutions
to reflect these developments and special needs, internal audit, as
the source of an advisory and guiding help to assume the
responsibilities of risk management, and reduce the risk to acceptable
levels. The Institute of Internal Auditors known American internal
audit in 1999 that «assurance and advisory activity of independent and
objective, is designed to add value and improve business and help
achieve the objectives of a systematic and disciplined work to
evaluate the effectiveness of risk management and control activities
and improve governance and control of the company». We find this
definition of the activity of internal audit was interested in the
assessment of risk management and improve their effectiveness, as is
done through the process of assessment to identify areas that require
focus and depth at the time of the audit.
The accreditation by the banks entirely on the internal control
mechanism and function of auditing for risk management operation, it
is not enough now, it appeared the urgent need to build tools and
special operations aimed at operational risk management (operations),
banks have begun to set up special programs for the management of
operational risks can provide Security and safety of the bank.
It could be argued that knowledge of the risks and evaluation and
management are key factors in the success and prosperity of banks and
achieve its objectives, if engage in risk intended to obtain higher
profits but not to manage these risks properly scientific way may lead
to the loss of revenue and the failure to achieve the strategic
objectives of the Bank, Therefore, proper understanding of risk
management, banking, self-assessment of risk and control procedures
required to answer many questions about:
- The risks and what types?
- Know the risks president of the bank, analysis and evaluation.
- Measurement and evaluation and management of the possibility of a
risk and its relation to come from the proceeds.
- Examining and evaluating the potential impact on business.
- Identify ways of effective control to reduce risks.
- What tasks can be carried out by risk management in banks?
- What self-evaluation systems at risk.
- How to apply control measures?
- What is the role of the Department of Internal Audit in risk
management?
All these and other questions can be answered as follows:
First: the concept of risk
Knows the risks that the bank could face unexpected losses and
unplanned and / or volatility of expected return on investment given.
In other words, this definition refers to the point of view of
internal auditors and managers to express concern about the negative
effects of future events have a potential impact on the ability to
achieve the objectives of the World Bank approved the implementation
of strategies successfully.
The auditors of the American Institute in the course of the objectives
set for the internal audit confirmed the need to include these
objectives to evaluate the adequacy of internal control system and
administrative management and controls of the work and effectiveness.
It is intended controls of the regulatory control of the key risks
facing the bank and related operations such as credit risk, and
currency exchange risk, the risk of profits and operations, and
negative publicity ... etc..
Second: The types of risks
Apportion risk to the banks to two main types: financial risks, and
risks of operations.
- First: financial risk:
All the risks related to the management of assets and liabilities of
the banks. This type of risk requires constant monitoring and
supervision by the departments of banks in accordance with the
direction the market, prices and commissions, economic conditions and
the other parties involved. The bank achieved through the management
of such risks profit or loss is the most important types of financial
risks as follows:
- Credit risk
It is important to recognize that any first-risk lending to certain
risks vary according to each process, and then the lender bank must
try everything possible prevent these hazards from becoming a reality
because it will not do anything to achieve the return, These risks may
lead to the loss of money lenders also, so the risk is the bank lender
grants a loan to individuals. Vimay to analyze the borrower's ability
to pay, hence must be a premium payment (monthly, quarter, half the
annual, annual), as well as profits to be achieved by the bank burden
possible eventuality does not lead to the disruption of the balance of
receipts and future payments the borrower. Often, the bank asked the
customer to ensure that the bank could be used if the borrower's
inability to pay.
The granting of loans to individual borrowers, or borrowers associated
with the bank through ownership if not under the control of sound may
lead to the creation of many of the problems; to determine the
eligibility of the borrower is not an objective such as the granting
of advances to shareholders, the parent company and its subsidiaries
and executives, in such cases, The granting of loans based on bias,
leading to the risk of losses caused by these loans.
- Liquidity risk
These are risks in the bank's inability to pay its financial
obligations as they fall due, the bank can not meet its short-term
phenomenon of the beginning of a deficit which, if continued could
lead to bankruptcy, liquidity risk may be significant to the
specialized banks in the activities of electronic money if Able to
assure the adequacy of funds to cover the payment at any given time,
as well as it could lead to risk reputation and the impact on
profitability, this can be measured bank liquidity through a variety
of means.
- The risk of inflation
Risks resulting from a general rise in prices and thus lower the
purchasing power of the currency.
- The risks of exchange rate fluctuations
It risks resulting from dealing in foreign currencies and the
fluctuation of currency fluctuations, which requires knowledge of the
full and thorough studies on the causes of price fluctuations.
- Interest rate risk
It risks resulting from the bank experienced losses as a result of
adverse movements in interest rates in the market, which may have
impact on the proceeds of the bank and the economic value of its
assets. The risks of specialized banks operating in the area of
electronic funds because of exposure to the risks of major interest
rates to the extent that the assets of reduced traffic due to the
negative interest rate that affects liabilities electronic money list.
There is also the risk of interest rates, including: re-pricing risk,
which arise from differences in the time period of eligibility (fixed
price) and the prices of assets (floating). The yield curve risk,
which arise from changes in the flow and shape of yield curve and the
risk of grassroots that may arise from the incorrect prices gained and
paid various departments.
- Reputation risk
At the root of the risks of failure in the proper functioning of the
bank not in line with regulations and laws so, an important factor and
reputation of the bank, as the nature of the activities performed by
banks rely on the good reputation among depositors and customers.
II: (risk operations (operating:
This type of risk generated by the process daily operations of the
banks does not usually an opportunity for profit, banks either been
lost or not achieved, and the absence of any loss of operations does
not mean the absence of any change, it is important for senior
management to ensure that a program to evaluate the risk analysis
processes , Including the risks of operations as follows:
- Financial fraud (embezzlement)
Misappropriation of cash is one of the most common forms of
embezzlement. Staff, representing most of the losses experienced by
banks result of embezzlement of funds deposited in banks or traveler's
checks branches and automated teller machines. The process of
restoring those losses resulting from fraud is complex and difficult,
sometimes impossible Vistdei need to design programs detection of
fraud and establish procedures to be more effective to reduce the
likelihood of occurrence, so that the cost of these measures do not
increase in any way for the cost of Try to recover misappropriated
funds and / or realized losses due to embezzlement.
In a study of six countries, about 60% of the average in any cases of
embezzlement by bank employees and 20% of the managers. The study
shows that about 85% of transaction losses in banks during the five
years was an imbalance in the secretariat staff.
- Forgery
The transaction losses resulting from fraud is fraud or forgery of
bank checks negotiable securities such as letters of credit or fraud
agencies legitimate result of the inability of staff in banks to
ensure adequate health of the documents provided to customers before
the start of their payment.
One study suggests that the losses resulting from fraud between 10% to
18% in banks; view of the increasing use of technology in banking
operations, which led to the development of opportunities for criminal
acts, which have developed methods and increased the difficulty of
detection by high-tech means.
- Counterfeiting currency
The evolution of technology in most cases helped to increase the
counterfeiting of currencies, where the United States of America
estimated the volume of counterfeit currency, the dollar at U.S. $
20,50,100 category are traded outside the United States of America,
and no expert in this field detection.
- Theft, burglary
The increased use of safety security standards at banks has reduced
the cases of theft and robbery. The increasing cases of theft and
robbery with a growing incidence of crimes of drug abuse, drug
trafficking, which are not widespread, largely in the Arab countries
unlike other countries.
- Cybercrime
These crimes of the most common crimes are the following key areas:
- ATM.
- Credit cards.
- Points of sale.
- Internal fraud through the collusion of staff.
- Exchange data automatically.
- External fraud.
Retail operations mechanism
Banks is currently expanding its services in this aspect of
operations, which include the payment of telephone bills, electricity,
water and other infrastructure to lead to an increase in risk
presented, but the improvement of security measures with the
introduction of special means an impact in reducing them to the
maximum extent possible.
- Occupational Hazards
Banks generally a lack of allocation of services and financial
products as the prevalent forms of operational risk in the banking
sector, and the underlying malpractice and neglect and risks
associated with legal liability, which must differentiate between
occupational hazards affecting the Governing Council on the impact on
those of the bank note that the commitments Arise from various sources
including:
- Claims shareholders.
- Services provided to customers.
- Practices of bank employees.
- Environmental obligations.
- Claims obligations borrowers.
|
