Financial risk management has been operating for decades and in different configurations .

As business processes become more and more global with the changes that have occurred over the years

Capital markets and foreign exchange , companies, banks and financial institutions had to protect against exposure to financial risks .

Those risks are reflected in its fullest when economic crises occur such as the Asian crisis in 1998 , the Dot Com bubble at 2000 , the subprime crisis in 2008.

Mainly common in the middle of the last century was to defend against credit risks. However, with the publish guidelines of the Basel Committee in the late '80s, began to develop in parallel to managing credit risk, a market risk management area which incorporated practices and products for hedging and hedge against currency, interest and price changes in stocks and commodities.

In the late '90s and early 2000s came the Basel 2 which included the levels of supervision and management of capital adequacy of banks including new techniques for managing credit, market and liquidity.

 

Financial risk types :

• Currency risk

• Interest rate risk ( spreads and risk-free interest )

• Risk Stocks and Commodities

• Liquidity risk

• Credit risk ( ratings companies , insolvency )

• Concentration risk (divisions, groups of borrowers, the issuer)

 

Estimating financial risk is determined by the type of risk :

• For market risk (currency, interest rate and commodity stocks) risk assessment based on statistical estimates incorporating position data , market data and measurement horizon .

• For credit risk is evaluated quantitatively and qualitatively .

• Quantitatively by statistical models of default (PD , LGD , EAD) .

• Qualitative questionnaire show that in determined lender's risk level (external rating, an internal model ) .

 

Today, financial risk management has become a necessity for regulatory business for companies and individuals. Forex Capital Markets and very advanced technologically and structurally so that without care and supervision of the Chief Risk officer or ongoing support and counseling by professionals in the field and certified, may a company or individual to reach into bankruptcy, or loss of substantial profits .