Banks usually have a complex organizational structure. Their network is widespread and they need to address risky situations well. This is why it is impossible for banks to completely stay dependant upon human resources to address whatever risky situations that arise. As a result, most banks use risk management software to make sure that the risk control strategies are well managed.
A risk management software for banks varies from those used in other organizations. As said earlier, due to the complex financial structure of banking, risk management software required by banks includes a number of functions which are not found by that used by other organizations.
Here is a summary of what a risk management software for banks can look like:
Credit Life Cycle:
‘Credit life cycle’ in banking terminology refers to the creation and establishment of relationships with clients. The survival of a bank is completely dependant upon its client. The more the clients are, the more will the bank get business. So, gradually every bank needs to build up good relationships with its clientele. If this does not happen, the bank won’t be able to stay in the market for a long time. Henceforth, every risk management software for banks will have the function of estimating the relationships a bank has built over the years.
The exposure and changes in the value of the collateralized assets of a bank are monitored. The software will notify the manager whenever the value decreases or increases. Not only does this help the bank in keeping an eye on where the risk is arising from, but also in monitoring which areas can be more profitable for a current year.
Basel Accords simply refers to the process of keeping up with the regulations set forth by the central bank of the country. A banking risk management software is capable of reckoning the reserves on daily basis. It can notify the bank whenever the capital reserves are about to go down. This way, the risk of the capital falling below the minimum requirements can be avoided.