Market Risk Essay Example | Topics and Well Written Essays - 2000 words - 1

Market Risk - Essay ExampleThe purpose of risk commission is to reduce the impact of different risks related to a purpose. It may be caused by risks posed by the environment, technology, organization or politics. But in financial care, risks can be managed using traded financial instruments and indeed there is a need to understand the grandeur of fundamentals in risk management.Governor Randal S. Kroszner, mouth before the American Bankers Association, Spring Summit Meeting in Washington, D. C. held on March 11, 2008, spelled out the importance of fundamentals in risk management. He stressed that there are fundamental issues that must be addressed by financial institutions in the light of economic disruptions and points out to sound risk management practices. Governor Kroszner cited an example as one of failures of banks policy is risk concentration, and cited an example of put all eggs in one basket, and that by concentration, he said, losses could occur at one time. Gov. Kros zner noted that as concentration of banks to its functions of basic lending, holding of securities, trading of complex instruments, providing liquidity instruments, pleasing in off-balance sheet transactions and other financial activities, banks are treading on a new grocery store where there are information and unidentified data which form hidden risks, and manifests its presence only during generation of problems. An example, Gov. Krozzner said, is the market- wide demand for liquidity experienced by US recently. (GovernorRandall S. Kroszner, 2008)In governance, information is the key for find out and this lies in the hands of senior management who are entrusted to do this function. Gov. Kroszner stated why information is central link taking into consideration recent events in the US.. He said that when information is kept in silo and not distributed vertically and horizontally within firms a segregation prevents managers from