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Valley of Risks and the Financial System

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Development is reflected by the progress of economic entities whose performance is measured in terms of their balanced/surplus/deficit financial situations. A sound financial situation of entities is possible through efficient channelization of funds in any financial system.

A robust financial system provides the efficient mechanism to ensure the transfer of funds, via different routes, from the entities who have surplus funds to the entities who face the deficit or need funds desperately.

The recent technological developments and revolutionary changes in the payment and settlement systems amplified the need for more interconnectedness as well as transparency in today’s complex financial system.

The more complex a financial system becomes the more the complexities arise. The more the mismatches take place between objectives and needs, as a result more the risks.

Risk is not a précis concept but the possibility of an actual outcome being different from the expected one. In other words, the probability of some unpleasant happening that results in damage or harm or loss that may not be exactly quantified at times, as in the case of recent global financial meltdown and turmoil.

As we all know that risk can neither be eliminated nor can it be erased completely but can be managed, that too at a desired level if well understood.

To manage risks at a desired level, there is a need to understand the types of risks involved, the tools and techniques to manage these risks, the implications and limitations of effectively managing these risks as well as the exposure and impact in case of risk management failure.

The online MOOC titled “Banking and Financial Markets: A Risk Management Perspective” offered by IIMBx on the edX platform helps you explore the world of risk and risk management in great detail. This advanced level course designed and presented by Professor PC Narayan, faculty IIM Bangalore, starting 25th August, is open for enrolment now.

To explore more about the course and acquire further details please follow this link.

 Learn, reinforce and grow!

[This blog is written by Divya Pareek, Pedagogical Research Assistant, IIMBx, Indian Institute of Management Bangalore]

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