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3. Managing financial risks in banks
The main objective of risk management in the bank – is to maintain acceptable profitability ratios with a record of safety and liquidity in the management of assets and liabilities of the bank, that means to minimize bank losses.
Effective management of risk level in a bank must address a number of problems – from tracking (monitoring) the risk to its valuation. The level of risk associated with a particular event is constantly changing due to the dynamic nature of external environment of banks. This makes the bank regularly to clarify its place in the market to assess the risk of certain events, to review relationships with clients and assess the quality of assets and liabilities, therefore, adjust their policies in the field of risk management.
The risk management process in the Bank includes: prediction of risk, determination of their probable size and impact, development and implementation of measures to prevent or minimize the associated losses.
All this implies the development of each bank’s own risk management strategy, that means that policy framework of decision-making so that to use all the features of the bank properly and at the same time to keep risk at an acceptable and manageable level.
Goals and objectives of risk management strategy is largely determined by the constantly changing external economic environment in which bank works.
The bank must be able to choose the risks that it can properly evaluate and which can effectively manage. Deciding to take a certain risk, the bank must be prepared to manage it, monitor it, which requires the skills a qualitative assessment of the processes.
The framework of the banking risk management should be based on the following principles:
– prediction of possible sources of losses or situations that can cause damage, their quantification;
– financing risks, economic incentives to reduce them;
– the duty and responsibility of managers and staff, the clarity of policies and mechanisms for risk management;
– coordinated risk control for all units and services of the bank, monitoring the effectiveness of risk management procedures.
The financial risk management should reduce the losses associated with this risk to a minimum. Losses can be estimated in monetary terms, estimated as steps to prevent them. The financial manager must balance these two assessments and to plan how best to strike a deal with the sense of minimizing risk. (Reuvid, 2000)
In general, methods of defense against financial risks may be classified depending on the person exposed to two types: physical protection, economic protection. Physical protection is the use of tools such as alarms, purchase safe, quality control system, protection of data against unauthorized access, employment protection, etc.
Investment protection is to forecast the level of additional cost, the assessment of severity of possible damage, use of the financial mechanism to eliminate the threat of risk or its consequences.
In addition, are well known four methods of risk management: the abolition, loss prevention and control, insurance, absorption.
Abolition would be to refrain from engaging in risk activities. But for the abolition of the financial business risk typically dissolves and profit.
Prevention of losses and control as a method of managing financial risk means a specific set of preventive and follow-up actions that are needed to prevent negative effects, to protect themselves from accidents, to control their size, if the losses have already occurred or are inevitable.
The essence of insurance is reflected in the fact that the investor is ready to abandon the revenue side, if only to avoid the risk, that is willing to pay for reducing the risk to zero.
For the purpose of the typical insurance created a monetary fund, the expenditure of its resources only to cover losses in the pre-defined cases, the probabilistic nature of the relationship; repayment of funds. Insurance as a method of risk management means two types of actions:
1) the redistribution of losses among a group of entrepreneurs who have been at risk of the same type (self),
2) request for assistance to the insurance company.
The high degree of financial risk the project leads to the need to find ways to artificially reduce. Reducing the risk – is reducing the likelihood and extent of loss. To reduce the risk are different techniques. The most common are: diversification, acquisition of additional information about the selection and outcomes, limiting, self-insurance; insurance against exchange rate risks; hedging; acquisition of control over the activities in related areas; accounting and estimate of the proportion of specific assets of the company in its general funds, etc. (Hopkin, 2010)

Conclusion
Risk Management – is one of the components of an enterprise manufacturing process, so it should be integrated into this process, must have its own strategy, tactics, operational implementation. It is important not only to manage the risk, but also periodically review activities and means of such control. The high efficiency of resources when running the program of risk management can be achieved only through a systemic approach, that is the most common.
One of the important components of risk management system is management of financial risks faced by any production
in the course of their activities, an important point is limited financial resources. However, there is insurance against financial risks, which is quite prevalent in developed countries.
For the enterprise it is equally important to manage the political, financial, personnel risks – all this requires the expenditure of resources, so many companies refuse to risk management, but in banking sphere financial risk management must be intensified.

References:
Reuvid, Jonathan (2003). Managing Business Risk. Kogan Page
Hopkin, Paul (2010). Fundamentals of Risk Management. Kogan-Page
Young, Peter C. (2000). Managing business risks. AMACOM
Alexander, Carol, Sheedy, Elizabeth (2005). The Professional Risk Managers’ Handbook: A Comprehensive Guide to Current Theory and Best Practices. PRMIA Publications
International Organization for Standardization. (2009). Risk management — Principles and guidelines on implementation. Web.
International Organization for Standardization. (2009). Risk management — Vocabulary. Web.