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Part - VI

So, banks must ensure that risk management is a custodian of overall banking activities to mitigate the risks. Banks must reengineer the process of executing the risk management function with young and dynamic professional risk managers who can offer innovative and sustainable solutions to banks to achieve the stated objectives. Also, need to train the concerned employees new concepts and market dynamics of risk management.

4. Complliance

a. Internall complliance
The banks should articulate the fair compliance and set MIS process between all functional units to risk management department. The MIS includes the reporting of identified risks, controls, action points, and frequency of risk occurrence etc., should help the risk management to work out the economic capital requirement for the bank to meet the loss. Strong interaction of functional units help the risk management to have proactive measures in placing appropriate controls to mitigate the risks. And, finally it’s the responsibility of risk management to monitor the risk events and to change the control standards as per the risk eventuality.

b. Externall complliance
The regulator might recommend the banks to maintain the required capital adequacy but the banks must ensure the suggested capital is sufficient to meet any unforeseen circumstances. Maintaining appropriate capital adequacy is different than optimize the bank’s capital efficiency. The efficient bank may come up and discuss with regulator (RBI) to minimize the capital adequacy based on the performance and controlling capacity to mitigate any sort of risks.

To do this the bank requires the transparency of information, fair accounting practice, appropriate records to justify the argument and efficiency of risk management as well as good corporate governance.

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