Risk Management Technique for Investors at DBS Bank

Running head: RISK MANAGEMENT TECHNIQUE FOR INVESTORS AT DBS BANK
Risk management technique for investors at DBS bank
Name of the Student
Name of the University
Author Note

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RISK MANAGEMENT TECHNIQUE FOR INVESTORS AT DBS BANK
Table of Contents
Chapter 1: Introduction:.............................................................................................................2
1.1 Introduction..........................................................................................................................2
1.2 Background of the study......................................................................................................2
1.3 Background of company......................................................................................................3
1.4 Rationale of study................................................................................................................3
1.5 Research aim........................................................................................................................4
1.6 Research objective...............................................................................................................4
1.7 Research questions...............................................................................................................4
1.8 Structure of study.................................................................................................................4
1.9 Conclusion............................................................................................................................5
Chapter 2: Literature review......................................................................................................5
2.1 Introduction..........................................................................................................................5
2.2 Uncertainty and risk.............................................................................................................6
2.3 The process of risk management..........................................................................................6
2.4 Summary............................................................................................................................13
Chapter 3: Research methodology...........................................................................................14
3.1 Introduction........................................................................................................................14
3.2 Research approach.............................................................................................................14
3.3 Justification of research approach......................................................................................14
3.4 Research design..................................................................................................................14
3.5 Justification of research design..........................................................................................15

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RISK MANAGEMENT TECHNIQUE FOR INVESTORS AT DBS BANK
3.6 Sampling strategy:..............................................................................................................15
3.8 Instruments of collecting data............................................................................................15
3.9 Procedure of collecting data...............................................................................................15
3.10 Gantt chart........................................................................................................................16
3.11 Ethical considerations......................................................................................................16
3.12 Data analysis....................................................................................................................17
Chapter 4: Discussion, Evidence and analysis.........................................................................17
4.1 Introduction........................................................................................................................17
4.2 Presentation of data............................................................................................................18
4.3 Analysis of data..................................................................................................................19
4.4 Limitations of proposed study............................................................................................20
4.5 Dissemination.....................................................................................................................20
Chapter 5: Conclusion and Recommendation..........................................................................21
5.1 Conclusion and Findings....................................................................................................21
5.2 Scope for future study........................................................................................................21
Reference list:...........................................................................................................................23
Appendix:.................................................................................................................................28
Chapter 1: Introduction:

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RISK MANAGEMENT TECHNIQUE FOR INVESTORS AT DBS BANK
1.1 Introduction
Management of risk has become very significant in the light of dynamic operating
environment and growing complexities of business of banking sector. Investors are exposed
to various types of market risks for investing in the stocks of bank. Risk management has
become one of the main functions of the service of bank that consist of risk identification and
controlling that keep the risk at an acceptable level. The basic objective of managing risks
pertains to investors and shareholders by optimizing the capital funds and maximizing the
profits that ensures long-term solvency position of business (Westbom et al. 2018). This
particular research paper concentrates on the risk management techniques adopted by
investors at the DBS bank of Singapore and how such technique helps in mitigating the risk.
1.2 Background of the study
The performance and nature of the performance of financial system in the country
must be judged in relation to the development at individual level. The principal reason for
transferring saving and fund to the private enterprise such as companies who are in need of
capital for productive investment is provided by the financial system. An efficient financial
system helps in channeling the resources to the activities that helps in generating highest
return for using the funds (Zhang 2017). Investors are offered with a variety of short and
long-term instruments via the formal and well-performed financial market. They are able to
make adequate and reasonable decision about the rewards and risk of investing the funds with
the help of qualified financial intermediaries. Risk management in banking sector is defined
as the logical development for executing a plan to tackle with the potential losses. Generally,
the practices of managing the risk in banking sector are to manage the exposure of investors
to the losses or risk. Financial risk management is the activity of monitoring the financial risk
and managing the impact of their risk. It is required to test the relationship between risk and

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RISK MANAGEMENT TECHNIQUE FOR INVESTORS AT DBS BANK
return and analyze the inter dependency and correlation between such variables (Mensah and
Premaratne 2017).
1.3 Background of company
DBS bank is a leading financial and banking services corporation headquartered in
Singapore that was earlier known as development bank of Singapore Limited. The
organization is well placed as partner to capture the opportunities across the region. Since the
focus of bank is on the market of Asia, the organization is exposed to risks concentration
within the region. Risks at DBS are effectively assessed by relying on specialist knowledge
of industry segments and regional markets. The approach to risk management at DBS
comprises of three building blocks including policies, risk methodologies and system, process
and report (Dbs.com 2019). The risk methodology used by the bank is VaR (Value at risk)
Model that helps in computation of potential losses of risk position due to movement of
movement of market in accordance with given level of confidence over a specified time
horizon. It is a model used by the bank, which is based on historical simulation with a
holding period of one day. The exposure to market risk is limited and monitored by using an
average of potential loss beyond a given level of confidence. The predictiveness of the VaR
model is verified by conducting the back testing with makes a comparison between the
positions at the close of each day with profit and loss arising from position of the next
business day (Dbs.com 2019).
1.4 Rationale of study
It is essential for investors to evaluate the risks associated with their investment to
create relationship between return and risk. Undertaking this research paper helps in ensuring
that there is sufficient basis of analysis for ensuring that loss generated from investment does
not exceed the acceptable boundaries. In addition to this, the importance of model of risk

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RISK MANAGEMENT TECHNIQUE FOR INVESTORS AT DBS BANK
management as a tool of mitigating risk is essential for the purpose of investment. In order
for investors to have best portfolio of investment, it is essential to evaluate the risks
pertaining to their overall investment.
1.5 Research aim
The aim of research is to identify suitable technique for management of risk for the
investors of DBS bank.
1.6 Research objective
The objective of research is to identify the most appropriate technique of managing
risks associated with investment for investors of DBS bank. In addition to this, the research
paper also intends to evaluate the appropriateness and measures of risk management
technique for investors using the model of CAPM and VaR.
1.7 Research questions
 How the application of CAPM determines the effectiveness of risk management at
DBS bank?
 What is the impact of risk management technique of VaR on investors?
1.8 Structure of study
For gaining a better understanding of the overall research study, the whole research
paper is divided into several chapters that are segregated further.

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RISK MANAGEMENT TECHNIQUE FOR INVESTORS AT DBS BANK
1.9 Conclusion
The first chapter presented an introductory approach to the research paper by
outlining the objectives and aims of research. This also includes a brief introduction on the
company selected and the risk methodology used by company for managing the risk.
Researcher has also provided rationale for conducting this research paper.
Chapter 2: Literature review
2.1 Introduction
This chapter deals with the in depth study of several theories and model used by
investors related to risk management. It sets out the conceptual framework and determines the
relationship between risk and uncertainty of investment. Literature review also provides
theoretical framework on the models of risk management. This section also outlines the
importance and theories associated with model of VaR and CAPM.
Chapter 1 Introduction
Chapter 2 Literature review
Chapter 3 Research Methodology
Chapter 4 Discussion and Analysis
Chapter 5 Conclusion and Recommendations

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RISK MANAGEMENT TECHNIQUE FOR INVESTORS AT DBS BANK
2.2 Uncertainty and risk
Risk can be defined in number of ways and the term risk and uncertainty are the two
common techniques in the risk management literature. Uncertainty is the occurrence and non-
occurrence of outcome because the probability of their occurrence is not known. Uncertainty
is related with the imperfect information and poor knowledge whereas risk is attributable to
situations with well-defined boundaries and considerable data (Abdoh and Varela 2018). The
difference between uncertainty and risks is widely acknowledged in the literature and these
terms are used interchangeably. For the purpose of review, the focus is on the management of
risk by investors at DBS bank.
2.3 The process of risk management
There are several definitions of risk management in literature and it is defined as a
systematic approach that helps in setting the best course of action under uncertainty situations
by the assessment, identification, understanding, communication and acting on risky issues.
Management of risk is a disciplined and structured approach that has purpose of managing
and evaluating the uncertainties faced by aligning the process, technology, strategy and
knowledge of organization. Process of risk management include all the process and
regulations of organization for the assessment, identification, control and analysis of the
potential risk along with supervision of efficiency and profitability of the measures that have
been taken. There are two approaches to the analysis of risk, which include qualitative and
quantitative analysis.
A considerable portion of research in investment management is devoted to
understand how the investors evaluate the riskiness of return and securities are associated
with risks. The discipline of finance has developed much theory about the management of
risk and its usefulness in assessing return. The capital asset pricing model (CAPM) provides