Financial & Treasury Risk Advisory
- Assessment of Credit Risk, Market Risk & Interest Rate Risk
Credit Risk – Credit risk is essentially defined as estimating the likelihood of a loss owing to a borrower’s failure to repay a loan or pay off a debt. The end-credit consumer’s risk can be calculated by considering his or her credit history, repayment capacity, loan condition, and any connected collateral.
Market Risk – In order to estimate market risk, the value-at-risk (VaR) method is utilized. Foreign currency risk, commodity risk, interest rate risk, and equity price risk are a few major types of risk that affect the whole market.
Interest Rate Risk – It is determined by the period of fixed income security, with long-term bonds having a larger price sensitivity to rate changes. Bond maturities diversification helps to offset interest rate risk to a greater extent.
- Assets Quality Review & Stress Testing
Asset quality review is a risk assessment and stress test for banks that helps to account for uncertainties in the event of unfavorable market conditions. Stress testing is a computer-simulated technique for assessing the viability of banks and investment portfolios amid adverse economic conditions. Stress testing aids in the assessment of investment risk as well as the measurement of internal processes and controls.
- Assessment of Expected Credit Loss
Expected credit loss is basically described as how organizations take the present and future economic conditions into account when calculating the amount of loss. The present value of cash shortfalls over the expected life of a financial instrument is known as an expected credit loss.
- Assessment of Asset Liability Management & Liquidity Risk
The process of managing assets and cash flows to reduce the risk of a firm losing money due to a loan default is known as asset-liability management (ALM). This method of evaluating bank loan portfolios and pension plans is based on the economic value of equity.
When a bank’s ability to satisfy its obligations is affected, the bank’s financial status is jeopardized. Financial organizations can reduce their liquidity risk by using effective asset-liability management. Liquidity risk can be used by companies and investors to help them manage their investments and holdings so that they can meet their financial obligations.