Interrelationship Among Different Sources of Bank Risk Exposure and Evaluation of Bank Risk Management Model

Running head: COMMERCIAL BANKING
Commercial banking
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Author Note

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Executive summary:
The paper demonstrates the identification of several types of risk exposure faced by the
financial institution such as banks and discusses about the identification of the relationships
between such risks exposures. In addition to this, paper also presents a critical evaluation of
the bank risk management model and outlines the critical discussion on why the model would
be considered incomplete if it measures and manages one type of risks. For the detailed
analysis, several case analysis has been done by reviewing various published papers. Some
examples of models has been also presented for identifying the incompleteness of the model.

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Table of Contents
Introduction:...............................................................................................................................1
Discussion:.................................................................................................................................2
Evaluating the interrelationship among different sources of bank risk exposure:.....................2
Evaluating the bank risk management model to manage and measure one type of risk:...........4
Conclusion:................................................................................................................................7
References list:...........................................................................................................................8

COMMERCIAL BANKING
Introduction:
The paper is developed to identify the interrelationships amongst various sources of
exposure concerning bank risks. The model of bank risk management is also evaluated for its
construction for measuring and managing one type of risk. In the process of maturity
transformation and financial intermediation, there are various types of risks that banks are
exposed. The risks which the banks are exposed to include systematic and unsystematic risks
and the exposure to such risks are measured by several models. Some model measuring the
risk demonstrates that such risk is related to fluctuation in the debt market and stock market
(Paligorova & Santos, 2017). Another source of risk exposure is volatility in the exchange
rate. The exposure to the risks forms the basis of their economic value. Exposure risks are
chosen by the banks that are distinctive and due to change in the conditions, such risk
exposure have different experiences.
Discussion:
Evaluating the interrelationship among different sources of bank risk exposure:
The dynamic risk exposure of banks reflects the changes in the crisis period and
banking business. There are various sources of risks which the banking institution are
exposed to and such risks comprised of credit risk, liquidity risk, foreign exchange risk,
interest rate risk, investment risk, concentration risk which is the bank risk exposure to one or
group of any related person, legal risk in the form of operational risk, strategic risk, money
laundering risk, terrorist financing and risk of bank operation compliance (Clark et al., 2018).
The leading source of problems in any bank is the credit risk exposure of banks and
this calls for the need of having keen awareness for measuring. Identifying and controlling