A prudent administration is one that measures the risks of the business line in which it is, adopting the actions that allow to neutralize them in a timely manner.
Unlike the uncertainty in which it is not possible to predict due to not having information or knowledge of the future, risks can be distinguished by being "visible" and their effects can be minimized.
CLASSIFICATION OF RISKS
A. CREDIT RISK
They are perhaps the most important because they affect the main asset: the loan account. A liberal credit approval policy generated by having excessive levels of liquidity, and high fund-raising costs, or by a relaxation of the assessment requirement of clients subject to credit, causes high delinquency, therefore we must be careful with the said "in good times bad credits are made."
B. MARKET RISKS
It occurs due to unforeseen variations in the prices of trading instruments. Every day many companies are closed and others are successful. It is the business and management capacity that will allow us to see the future and choose successful products to maintain customer loyalty, preserve image and trust.
C. INTEREST RATE RISK
It is produced by the lack of correspondence in the amount and maturity of assets, liabilities and items off the balance sheet. Generally when you obtain loans at variable rates. In certain markets, the demand for money can affect interest rates, which can reach levels such as the debt crisis as a result of changes in the international economy.
D. LIQUIDITY OR ANCHOR RISK
It occurs as a result of continuous portfolio losses, which deteriorates working capital. Excessive growth in liabilities can also lead to the risk of loss of liquidity.
E. EXCHANGE RISK
Originated in fluctuations in the value of currencies. The economies of developing countries like ours are not free from growing trade or balance of payments gaps. The normal consequence is the devaluation of the exchange rate, which will affect by raising the value of the loans granted in dollars, which may be unpayable by the debtors if their economic activity generates income in national currency. To protect against this risk, it is necessary to select the portfolio of borrowers by placing loans in foreign currency only to those who operate in this currency, and to assume a matching rule between what is captured and what is placed (at an amount raised equal to the amount placed in foreign currency)
F. RISK OF EQUITY INSUFFICIENCY
The risk of capital insufficiency is defined as the fact that the Institutions do not have the appropriate capital size for the level of their operations corrected for their credit risk.
G. DEBT RISK AND LIABILITY STRUCTURE
It is defined as not having adequate sources of resources for the type of assets indicated by the corporate objectives. This includes not being able to maintain adequate levels of liquidity and resources at the lowest possible cost.
H. OPERATIONAL MANAGEMENT RISK
Operational risks are understood to be the possibility of occurrence of financial losses due to deficiencies or failures in internal processes, in information technology, in people or due to adverse external events.
It is the risk that the other expenses necessary for the operational management of the Institution, such as personnel and general expenses, cannot be adequately covered by the resulting financial margin. A good management of operational risk indicates that they have been performing efficiently.
I. LEGAL RISK
It can occur as a result of legal changes or regulations in a country, which can put one institution at a disadvantage compared to others. Abrupt changes in legislation can lead to confusion, loss of confidence and possible panic.
J. SOVEREIGN RISK
It refers to the possibility of breach of obligations by the state
K. SYSTEMIC RISK
It refers to the entire financial system of the country in the face of internal or external shocks, such as the impact of the Asian crisis, the Russian crisis, the phenomenon of the child, which cause the volatility of the markets and the fragility of the financial system.
CONCLUSIONS
These risks can be covered by:
- A professionalized administration (highly specialized in the new trends of the financial system) according to the modernization and globalization times that we live in. A prudential regulation established by the competent authority, supported by the board of directors and complied with by the manager. Permanent technological innovation.
BIBLIOGRAPHY
- ANTHONY Robert 1998: Financial Administration
- BELLIDO SÁNCHEZ, Pedro: Financial Administration. Scientific Technician Ed
Lima - Peru
- LUGO ABAN José1998: Administrative Accounting. Edit. San Marcos
- RESEARCH INSTITUTE: Financial Mathematics Edit. Pacific Lima Peru
EL PACIFICO 2002
- WESTON FRED, Brigham 1999: Financial Management Manual. Edit.
Interamericana Spain
- WESTON Fred. 1987: Finance. Mac Graw-Hill Mexico
