General description of banking risks

Banking by its very nature involve risks, ie Risk is inherent component in the functioning of commercial banks - universal credit institutions, created to attract financial resources and placing them on his behalf under the terms of repayment and interest payment. Understanding risk assessment and proper management to avoid or significantly reduce the inevitable losses that occur in the banking business, so we first consider the economic substance of the risks. The implementation of any business today can not be without risks. Typically, risk is associated with the uncertainty of the possible outcome. That is, there is uncertainty, the need to make decisions aimed at eliminating, preventing, and minimizing the impact of the negative consequences of risk. Despite the long history of risk and its study in the scientific literature there is no consensus on the definition of this concept and a unified approach on the concepts of risk theory. As an economic category risk emerged with the advent of commodity-money relations and represents an event that may happen or not. In addition, for events that occurred, there are three possibilities economic result: positive (gain, profit) of zero (the result is not changed), negative (loss, loss). Scientists believe that the first attempt to define the essence of the scientific content and concepts of "risk" was made by the mathematician Johann Tetensom (XVIII century), although the study group and the risks inherent in the writings of scientists D. Graunt, J. Witt, E. Halley more in the XVII century. [104] In theory, the predominant risk is the point of view, identifies risks and uncertainties. The scientific debate on this issue have been going on for about a century. Attempt to combine the economic content of the "risk" with "uncertainty" is a concept some scholars, based on the principles of universal determinism (causality of events and phenomena), which is based on the view that the risk of an accident, but because of the people there are in a state of uncertainty decision-making. Based on this concept we can conclude that the presence of external factors that always accompany any activity and life, forms the objective side of risk, and the subjective factor - generates uncertainty. But uncertainty is formed due to objective reasons such as availability of resources to achieve goals, and subjective - the psychological factor, the degree of faith, beliefs, availability of skills, knowledge and experience. And, as you know, the subjective factor is difficult to estimate and impossible to measure. Topic: Risks in Banking | Tags: feature